The Court of Appeal has upheld a decision refusing to wind up a Luxembourg sub-fund under sections 220 and 221 of the Insolvency Act 1986 ("IA"): East Riding of Yorkshire Council v KMG SICAV-SIF-GB Strategic Land Fund [2025] EWCA Civ 1137.
Those sections provide for the winding up of an "unregistered company", which is defined to include any association and any company that is not registered in the UK under the Companies Act 2006, including a foreign company. The Court of Appeal held that the fund was not an association within the meaning of the legislation, as the Council had argued, and therefore it could not be wound up by the English court. The lower courts had dismissed an argument that an unregistered company could include an entity that was neither an association nor a company, and there was no appeal on that point so the Court of Appeal did not express a view on it.
This decision provides important clarity for UK creditors seeking to enforce their rights against foreign corporate structures (especially those whose corporate form does not have an analogy in English law, as is common in an investment funds context) and demonstrates the limits of the English court's winding up jurisdiction. It suggests that the IA does not permit the winding up in England of foreign investment fund compartments that lack separate legal personality, even if they are treated as separate entities for investment purposes. As cross-border investment structures become increasingly complex, it is a reminder for creditors to carefully review any relevant structures holding the assets they might wish to enforce against and the legal remedies available to them, both at the due diligence phase of an investment and in considering any litigation against the fund.
Background
The claimant local authority ("the Council") had invested £20 million in a sub-fund ("the Sub-Fund"), of a Luxembourg investment company ("the Company"). The Sub-Fund was classified as a "Dedicated Fund" within the Company. The Company, incorporated under Luxembourg law, operated multiple Dedicated Funds, each representing a separate portfolio of assets. An investor would obtain shares in the Company of a specific class corresponding to the relevant Dedicated Fund. UK institutional investors, including the Council, invested in the Sub-Fund by subscribing for shares in the Company. The investor had exposure only to the assets of the particular Sub-Fund in which it had invested.
The Sub‑Fund launched in 2010, targeting UK strategic land opportunities. Over time, the Sub-Fund attracted around £82 million in total subscriptions, but it encountered financial difficulties during the period from 2016 to 2019, including a significant exposure on a land option and subsequent management changes.
In February 2019, the Company resolved to liquidate the Sub-Fund in Luxembourg, through a process set out in the Company's articles of association which involved appointing a liquidator under the supervision of the Board. Subsequent notices warned that asset realisations were unlikely and, by December 2020, the liquidation net asset value was declared to be zero, leaving no distribution for shareholders.
In May 2021, the Council petitioned for the compulsory winding up of the Sub-Fund in England and Wales under sections 220 and 221 IA. The central question was whether the Sub-Fund, which was a pool of assets managed by the Company but (according to agreed Luxembourg law expert evidence) was not itself a legal entity and had no legal personality, could be treated as an "unregistered company" within the meaning of section 220 IA, and thus be amenable to winding up by the English court (provided certain other jurisdictional hurdles were met).
At first instance, Deputy ICC Judge Kyriakides ([2024] EWHC 1069 (Ch)) dismissed the Council's petition to wind up the Sub-Fund. At that stage, the Council accepted that the Sub-Fund was neither a company nor an association, but argued that it was nevertheless a type of structure which had similarities to both and which Parliament must have intended could be wound up under the unregistered company provisions. The court disagreed, finding that section 220(1) IA contained an exhaustive definition of an unregistered company that did not include any entities that were neither companies nor associations.
In the alternative, the court found that the Sub-Fund was not the type of entity which Parliament could have intended should be amenable to be wound up in England. Although the Sub-Fund was "a segregated 'entity' in respect of which trade is conducted with a view to a profit", it lacked other characteristics that were necessary for it to be an entity that Parliament intended could be wound up because it had: (i) no contributories; (ii) no legal personality of its own or capacity to contract or incur legal liabilities; and (iii) no separate board or management whose powers a liquidator could replace.
Richard Smith J dismissed the Council's appeal ([2024] EWHC 2845 (Ch)), in essence agreeing that section 220(1) IA does not extend beyond associations or companies. The Council changed its position before him and argued that the Sub-Fund was in fact an association, alternatively sufficiently analogous to an association or company, that it should fall within the scope of section 220(1) of the IA. This argument did not persuade the judge, who found that Deputy ICC Judge Kyriakides had been entitled to conclude that the Sub-Fund did not have the characteristics of a company or association.
The Council challenged this decision on appeal to the Court of Appeal, principally on the ground that Richard Smith J had erred in finding that the Sub-Fund was not a company or association within the meaning of section 220(1) IA.
Decision
The Court of Appeal (Lady Justice King, Lady Justice Nicola Davies and Lord Justice Snowden) upheld the decisions of the lower courts and dismissed the Council's appeal.
The court considered the cases of Re St James's Club (1852) 2 De G.M.&G. 383 and Re International Tin Council [1989] Ch 309 which it said established that "association" in section 220(1) IA does not include an association that Parliament could not reasonably have intended should be the subject of the winding up process under the IA. These authorities show that the court is required to focus its attention not only on the nature and constitution of the body in question, but also on the nature of the process of winding up by the court under the IA. The Court of Appeal considered it clear that, to fall within section 220(1) IA, an association must be comprised of persons who have some form of substantive legal relationship with each other (typically mutual contractual obligations), rather than merely persons who are connected for purely social or personal reasons or who share a common interest.
The court stressed that the process of winding up under the IA is a collective enforcement of debts against the property of a debtor and is conducted for the benefit of creditors whose rights are admitted or established in the process. That presupposes the debtor to have assets and creditors, and that any persons to whom a potential surplus may be distributed have such entitlement against the association.
Applying these principles, the Sub-Fund was not an association which Parliament could have intended should be amenable to being wound up by the Court under the IA. In particular, the Sub-Fund was not in any sense a body whose existence was founded on contractual obligations between the members themselves. It was just a collection of assets owned and managed by the Company. The investors who subscribed money which was allocated to the Sub-Fund did not obtain any direct property rights in or over the assets comprising the Sub-Fund. Their only rights in relation to the assets in the Sub-Fund were rights against the Company. In short, the only legally relevant "association" was the relationship between the shareholders of the Company.
The court also noted that the Sub-Fund was not a debtor and had no creditors, and therefore could not readily be brought within the primary purpose of a winding up under the IA which is for the liquidator to conduct a collective enforcement process for the benefit of creditors.
The court also rejected the Council's argument that the fact that the Sub-Fund could be the subject of a judicial winding up in Luxembourg law affected the interpretation of the IA. That said nothing about whether the UK Parliament intended that the winding up provisions of the IA could be applied to such an entity, and it could not be assumed that the Luxembourg process would be a collective remedy comparable to a winding up under the IA.
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