In a recent interesting Scottish case, HSBC Bank plc, Re an Order to wind up Kirkbride Investment Limited [2009 Scot CS CSOH 147], the Court of Session granted an application to wind up an overseas company and appoint Joint Provisional Liquidators. The company, registered in Gibraltar, was involved in property development in Scotland with the secured lending provided by the Bank.
The Bank submitted that the company was an "unregistered company" for the purposes of Part V of the 1986 Insolvency Act and that section 2215 gives the court jurisdiction to wind it up as the company is unable to pay its debts as they fall due. The court was satisfied that it had jurisdiction as the company's only business was to develop property in Scotland and therefore its principal place of business was Scotland.
The court then considered whether it should exercise its discretion in winding up a foreign company. The court followed the approach of the English courts and found that there were three main requirements for the exercise of the power to make a winding up order in relation to a foreign company. These are:
- there must be a sufficient connection with Scotland which may, but does not have to, consist of assets within the jurisdiction;
- there must be a reasonable possibility of benefit to the petitioners if the court were to make the winding up order;
- one or more of the persons interested in the distribution of the company's assets must be persons over whom the court can exercise a jurisdiction.
This decision illustrates the Scottish courts' willingness to exercise discretion when winding up a foreign company by adopting the same approach as the English courts. This judgment should provide a degree of comfort to creditors during the economic downturn.