| Insolvency — Winding up — Partnership carrying on regulated activity in breach of general prohibition — Whether just and equitable to wind up partnership — Financial Services and Markets Act 2000, s 367 — Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)
In re The Inertia Partnership LLP
Ch D: Jonathan Crow QC, sitting as a deputy High Court judge: 23 February
2007
The jurisdiction under s 367 of the Financial Services and Markets Act 2000 to wind up a partnership, which was carrying on a regulated activity in contravention of the general prohibition in s 19, on the just and equitable ground should be exercised with a view to protecting the public interest and balancing all relevant interests against each other to ascertain the just and equitable result.
Jonathan Crow QC, sitting as a deputy High Court judge in the Chancery Division, so held when determining that The Inertia Partnership LLP should be wound up on a petition presented by the Financial Services Authority (“FSA”) under s 367 of the 2000 Act.
The partnership, whose sole member was Mr Roderick Shears, introduced three companies that wanted to raise capital to a British Virgin Islands company, which engaged three brokers known as “boiler rooms”. The partnership entered into agreements with two of the companies whereby it issued share application forms, was named as the receiving agent, collected the moneys and distributed them to the companies. The brokers cold-called consumers in the United Kingdom and offered them the opportunity to buy shares in the companies. The partnership later went into creditors’ voluntary liquidation.
The FSA presented a petition under s 367 of the 2000 Act to wind up the partnership on the basis that it had carried on a regulated activity in contravention of the general prohibition in s 19 of the 2000 Act, it was insolvent and it was just and equitable that it be wound up.
JONATHAN CROW QC said that the partnership was neither authorised nor exempt for the purposes of the 2000 Act, it was carrying on business within s 22 of the 2000 Act and the shares in the three companies were all specified securities within the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), as amended by SI 2001/3544. Moreover the activities carried on by the partnership amounted to specified activities for the purposes of the 2001 Order, which the partnership had breached in relation to two of the companies. When considering the exercise of the jurisdiction on the just and equitable ground under s 367 of the 2000 Act, there was a close analogy between that section and the jurisdiction to make winding up orders on the petition of the secretary of state under s 124A of the Insolvency Act 1986. In both cases petitions could be brought by public officials and the court had a power to make a winding up order in the public interest on the just and equitable ground. Both jurisdictions should be exercised with a view to protecting the public interest and in so doing the court needed to balance all relevant interests against each other to ascertain the just and equitable result. Applying that test to the instant case, a winding up order should be made.
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