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Public Interest Winding Up – Is ‘lack of transparency’ a sufficient basis for the Secretary of State to seek to wind up a company?

In The Secretary of State for Business, Energy and Industrial Strategy v Celtic Consultancy & Enterprises Ltd [2021] EWHC 1240 (Ch), the High Court considered petitions seeking the winding up of three companies under s 124A Insolvency Act 1986. The court had to decide whether a company’s alleged failure to explain the basis upon which monies were received could properly form the basis of a winding up petition on public interest grounds. The judge dismissed the petitions against two of the companies but found that the third company’s lack of transparency was, on the facts, demonstrative of it acting in an inherently objectionable way and made an order for it to be wound up. Edward Davies QC and Patrick Harty acted for the two companies that successfully defended the proceedings.


The petitions brought by the Secretary of State for Business, Energy and Industrial Strategy (Secretary of State) sought the winding up of three companies: Celtic Consulting & Enterprise Ltd (CCE), Celtic PMC Ltd (PMC) and Haoma (UK) Ltd (formerly known as Simple Financial Administration Ltd) (Haoma).

The sole shareholder and director of CCE and PMC, Mr Clive Howells (Mr Howells), was also the sole shareholder and director of Celtic Wealth Management and Financial Planning Ltd (Celtic Wealth), which operated as an introducer of individuals seeking pensions advice to financial advisors. The winding up orders sought against CCE and PMC related to their receipt of funds arising from introductions made by Celtic Wealth to Active Wealth Ltd (Active Wealth), an independent financial advisor regulated by the FCA. Celtic Wealth began introducing business to Active Wealth in 2014 and these two companies entered into an ‘introducer agreement’ under which Celtic Wealth received 50% of the fee Active Wealth charged clients that were introduced by Celtic Wealth.

In addition to those fees, where Celtic Wealth introduced a client to Active Wealth and the client chose to move their pension into a SIPP, the pension would then be invested in specific investment funds, and the investment companies running those funds would sometimes pay a commission to the introducer who had introduced the business to Active Wealth. Strictly speaking, this commission, the so-called ‘back-end payments’ – was due to Celtic Wealth, but Mr Howells designated CCE as the recipient of these funds because he wished to keep them separate from the fees payable under the introducer agreement.

PMC was set up as part of a tax efficient remuneration trust arrangement and, within that structure, operated as a “personal management company”.

Haoma’s role was to receive funds from the investment companies and pay these sums on to introducers, including CCE. Haoma was associated with Mr Darren Reynolds, who owned and controlled Active Wealth. Mr Howells held no interest in Haoma.

Following complaints from members of the public, Active Wealth was suspended from accepting new clients by the FCA on 24 November 2017 and went into creditors’ voluntary liquidation in 2018. The Secretary of State then presented petitions seeking the winding up of CCE, PMC and Haoma on public interest grounds under s 124A IA 1986.

The Secretary of State’s case against CCE and PMC was based solely on the proposition that their winding up was warranted because there was a ‘lack of transparency’ regarding the sums that it has received. Specifically, it was said that they were unable to explain the legal basis upon which CCE was entitled to the sums that had been received, or how the various sums had been calculated or ascertained, or which particular investment by which introduced client had resulted in the making of the relevant payments, and on what basis.

The petition against Haoma was similarly based on an alleged lack of transparency and also on the basis that Haoma had failed to file its accounts for the year ended 30 June 2018 and its confirmation statement for the period to 13 June 2019.

CCE and PMC each denied that there had been lack of transparency. Haoma did not respond despite having been duly served with the petition.


In considering how s 124A should be applied, HHJ Cawson QC (sitting as a High Court judge) relied upon the principles set out by Norris J in The Secretary of State for Business Innovation and Skills v PAG Management Service Ltd [2015] EWHC 2404 (Ch) (PAG I), as approved by the Court of Appeal in The Secretary of State for Business, Energy and Industrial Strategy v PAG Asset Preservation Ltd [2020] EWCA Civ 1017 (PAG II). In particular, he noted that a company could be wound up under this section if its business was inherently objectionable because its activities were contrary to a clearly identified public interest. As Asplin LJ had highlighted in PAG II, the application of s 124A required the court to carry out a balancing exercise, which involved weighing the factors that pointed to it being just and equitable to wind up the company against those which pointed away from that conclusion. However, while Asplin LJ had suggested that an essential element of the winding up petition would be missing if there was no evidence of harm to the public, HHJ Cawson QC did not consider that this required a specific harm to be shown and noted that conduct which did not cause specific harm to the public “might, in an appropriate case, found the basis for a winding up petition in the public interest if the Secretary of State can properly identify some public interest that would be promoted by the winding up of the company“. This aspect is discussed further below.

Applying these principles to the case before him, HHJ Cawson QC found that, although a company’s obligation to explain transactions was prescribed by certain statutory provisions such as s 386 CA 2006 relating to company accounts, and that a company might reasonably be expected to co-operate with an investigation such as one under s 447 CA 1985, there was no freestanding requirement or obligation for the company to explain transactions.

However, there might be certain circumstances in which a failure to explain could in itself be indicative of the company operating in an illegal or inherently objectionable way, such as where there was a legitimate concern that monies received by a company might represent the proceeds of crime or money laundering absent a cogent explanation. In those circumstances, failure by the company to provide sufficient explanation could, in appropriate cases, be taken to indicate that the company’s affairs had been conducted in an inherently objectionable way “on the basis that persons acting with propriety and honesty might have been expected to provide an explanation that would have dispelled the concerns“. The same principle would apply not just to monies received that might be taken to be the proceeds of crime or money-laundering, but also where the legitimate concerns related to other “nefarious or potentially nefarious activity”.

On the facts, however, the judge did not consider that there was anything in relation to the conduct of CCE or PMC that pointed to any lack of honesty or inherent impropriety. In particular, Mr Howells had provided a consistent explanation as to the circumstances and basis upon which CCE received back-end payments from Haoma and it was not uncommon for commissions of this kind to be paid by investment companies, and the Secretary of State had not suggested to the contrary, or that there was anything inherently objectionable in the practice of investment companies paying commissions to introducers.

Based on the totality of evidence, the judge was therefore unable to conclude that the affairs of either CCE or PMC had been conducted in an inherently objectionable way and he declined to make a winding up order in relation to either company on the grounds of public interest.

However, in relation to Haoma, HHJ Cawson QC was satisfied that there was a specific public interest in the company being wound up. He found that the Secretary of State had raised a number of legitimate concerns with regard to the conduct of Haoma’s affairs, in respect of which no cogent or satisfactory explanation had been provided. It was especially significant that, unlike CCE, Haoma had a direct relationship with the investment companies as an intermediary and yet was unable to explain how the amounts received were calculated or by reference to which clients introduced by Active Wealth. As no explanations had been provided in relation to these matters, the judge considered that this lack of transparency was demonstrative of the company’s affairs having been conducted in an inherently objectionable way and with a want of probity. This was compounded by the fact that Haoma had failed to file any accounts since 2018 or any confirmation statement since 2019. He therefore made an order for Haoma to be wound up.


The decision in SoS v CCE potentially broadens the scope of s 124A in two respects.

First, the judge held that it was not necessary for the petitioner to establish that the company’s conduct gave rise to specific harm to the public;

Secondly, the court took the view that ‘a lack of transparency’ could be a freestanding ground for a winding up order.

Taking these in turn:

In PAG I, Norris J held that even if a company’s business did not involve breaches of legal or regulatory rules, it could still be wound up on the public interest ground if its business was “inherently objectionable” because “its activities are contrary to a clearly identified public interest”. The guidance laid down by Norris J in PAG I was adopted by the Court of Appeal in PAG II, and also by the judge in the present case. However, the judge’s conclusion that “that conduct that does not cause specific harm to the public might, in an appropriate case, found the basis for a winding up petition in the public interest if the Secretary of State can properly identify some public interest that would be promoted by the winding up of the company” sits awkwardly with this guidance. It seems to imply that a company’s business could be “inherently objectionable” and “contrary to a clearly identified public interest” (as the judge accepted was required) without causing any identifiable harm to the public. That is hard to understand.

It may be that the court had in mind that there was no requirement that the business be shown to cause harm to specific members of the public rather than causing harm to the public as a whole. That is certainly correct, as Norris J’s decision in PAG I shows.

However, if the court intended to go further than this and hold that a company whose business did not cause harm to the public either individually or collectively could still be wound up on public interest grounds if the court was nonetheless satisfied that “some public interest … would be promoted”, then it made new law. This would confer a broad and free-roving power on the court that would be difficult to reconcile with the decision of the Court of Appeal in PAG II.

Regarding the judge’s conclusion that ‘lack of transparency’ could be a freestanding ground for a winding up order, this was explained on the following basis: “An extreme example might be where a company had failed, or been unable to explain where money that it had received had come from in circumstances where the only fair inference, on the particular facts, given the absence of an explanation or the inadequacy of such explanations as had been given, was that the monies in question represented the proceeds of crime or of money laundering.” This seems unnecessary: if “the only fair inference” is that the company has behaved illegally and the company does nothing to rebut that inference then the answer is clear: the court should simply draw the inference, hold that the company has behaved illegally and wind it up for that reason (assuming the Secretary of State has made the necessary allegation). In short, it is hard to understand why the normal rules as to the shifting of evidential burdens and the drawing of inferences are insufficient.

Further, it might be said that a court should only take the significant step of making a winding up order for clearly identified reasons and, where it does so, should make clear factual findings. Indeed, one might think that the public interest would be far better served by the court making positive findings of misconduct where the evidence supports them rather than limiting itself to the elusive concept of ‘lack of transparency’.