EG 13.4 1Petitions for administration orders or compulsory winding up orders: determining whether to seek any insolvency order

1Where the FCA believes that a company or partnership to which sections 359(1) and 367(1) of the Act applies is, or is likely to become, unable to pay its debts, the FCA will consider whether it is appropriate to seek an administration order or a compulsory winding up order from the court. The FCA's approach will be in two stages: the first is to consider whether it is appropriate to seek any insolvency order; the second is to consider which insolvency order will meet, or is likely to meet, the needs of consumers.

1In determining whether it is appropriate to seek an insolvency order on this basis, the FCA will consider the facts of each case including, where relevant:

1. (1)

   whether the company or partnership has taken or is taking steps to deal with its insolvency, including petitioning for its own administration, placing itself in voluntary winding up or proposing to enter into a company voluntary arrangement, and the effectiveness of those steps;

2. (2)

   whether any consumer or other creditor of the company or partnership has taken steps to seek an insolvency order from the court;

3. (3)

   the effect on the company or partnership and on the creditors of the company or partnership if an insolvency order is made;

4. (4)

   whether the use of other powers, rights or remedies available to the FCA, consumers and creditors under the Act and other legislation will achieve the same or a more advantageous result in terms of the protection of consumers, and of market confidence and the restraint and remedy of unlawful activity, for example:

   1. (a)

      in the case of authorised persons and appointed representatives, the interests of consumers may, in certain circumstances, be met by the use of the FCA's intervention powers and by requiring restitution to consumers;

   2. (b)

      in the case of unauthorised companies and partnerships, the FCA will consider whether the interests of consumers can be achieved by seeking an injunction to restrain continuation of the carrying on of the regulated activity and/or an order for restitution to consumers.

5. (5)

   whether other regulatory authorities or law enforcement agencies propose to take action in respect of the same or a similar issue which would be adequate to address the FCA's concerns or whether it would be appropriate for the FCA to take its own action;

6. (6)

   the nature and extent of the company or partnership assets and liabilities, and in particular whether the company or partnership holds client assets and whether its secured and preferred liabilities are likely to exceed available assets;

7. (7)

   whether there is a significant cross border or international element to the business which the company or partnership is carrying on and the effect on foreign assets or on the continuation of the business abroad of making an insolvency order;

8. (8)

   whether an insolvency order is likely to achieve a fair and orderly realisation and distribution of assets; and

9. (9)

   whether there is a risk of creditors being preferred and any advantage in securing a moratorium in relation to proceedings against the company or partnership.

1After the FCA has determined that it is appropriate to seek an insolvency order, and there is no moratorium in place under Schedule A1 to the Insolvency Act 1986 (as amended by the Insolvency Act 2000) (hereafter referred to in this chapter as 'the 1986 Act'), it will consider whether this order should be an administration order or a compulsory winding up order.