No English Winding-Up of SICAV “Dedicated Funds”: Compartment Is Not an “Association” under Insolvency Act 1986 s 220

Introduction

This Court of Appeal decision in East Riding of Yorkshire Council (as Administrating Authority of the East Riding Pension Fund) v KMG SICAV-SIF-GB Strategic Land Fund ([2025] EWCA Civ 1137) addresses a novel and commercially important question at the intersection of cross-border insolvency and investment fund structuring: can an asset “compartment” (a “Dedicated Fund”) of a Luxembourg specialised investment company (SICAV-SIF) be wound up in England as an “unregistered company” under sections 220–221 of the Insolvency Act 1986?

The appellant, East Riding of Yorkshire Council, invested £20 million in a class of shares of KMG SICAV-SIF-SA referable to the “KMG SICAV-SIF-GB Strategic Land Fund” (the Sub-Fund). Following suspension and then voluntary liquidation of the Sub-Fund by the umbrella company’s board, the Council petitioned in England to wind up the Sub-Fund as an “unregistered company.” At first instance and on first appeal, the courts rejected that contention. The present (second) appeal was dismissed by the Court of Appeal (Snowden LJ; Nicola Davies and King LJJ agreeing).

The core issue was whether the Sub-Fund is an “unregistered company” within section 220, such that it is capable of compulsory winding up under section 221. The Council’s case crystallised into the argument that the Sub-Fund was an “association” for these purposes. The Court of Appeal held that it is not. In doing so, it clarifies how the statutory term “association” should be understood in the winding-up context and how the collective enforcement nature of English winding up determines whether a body is a proper subject of that jurisdiction.

Summary of the Judgment

The Court of Appeal dismissed the appeal. Snowden LJ held that:

• The Sub-Fund is not an “association” within section 220(1) of the Insolvency Act 1986 and therefore cannot be wound up under section 221 (paras 66–77).
• A “Dedicated Fund” of a SICAV-SIF is, under Luxembourg law and the fund’s constitution, merely a segregated pool of assets owned and managed by the umbrella company; it has no legal personality, cannot hold property, cannot incur obligations, and has no management of its own (paras 28, 67–73).
• The English winding-up regime is a collective enforcement mechanism against the property of a debtor for the benefit of its creditors. That regime presupposes a “body” with its own property, creditors, and members, none of which exist at the Sub-Fund level (paras 61–64, 72–74).
• The availability of a Luxembourg “judicial liquidation” for a compartment under the 2007 SIF Law does not imply that Parliament intended the English winding-up jurisdiction to apply to such compartments (para 76).
• Given the failure on Ground 1, it was unnecessary to decide whether the Council was a contingent creditor (Ground 2) or whether a discretion should be exercised under the Re Russian & English Bank line of authority (Ground 3). Snowden LJ nonetheless indicated that, even if recoveries were possible, any creditor status would be vis-à-vis the umbrella company, not the compartment (paras 79–80).

Analysis

Precedents Cited and Their Influence

The Court’s reasoning is firmly anchored in classic and modern authorities construing “association” and outlining the nature of winding up:

• In re The St. James’ Club (1852) 2 De G.M.&G. 383 (paras 51–55):
  • Established that “association” in the winding-up legislation is not a catch-all for every organised grouping. Social clubs where members have no transmissible interest, no partnership-like rights in assets, and no liability for debts fall outside Parliament’s intended scope.
  • Snowden LJ uses St. James’ Club to underline that “association” must be construed with the winding-up context in mind; not every body of persons is within the jurisdiction.
• In re International Tin Council [1989] Ch 309 (ITC) (paras 55–56):
  • Confirms the St. James’ Club approach: “association” excludes bodies that Parliament could not reasonably have intended to subject to the English court’s winding-up process, such as international organisations of sovereign states.
  • Provides the overarching test: does subjecting the body to English winding up cohere with Parliament’s intention and the nature of the process?
• Re Caledonian Employees Benevolent Society [1928] SC 633 (para 60):
  • Clarifies the essential feature of “companies, associations and partnerships” in this context: a consensual contractual nexus among members regulating their mutual relations around a common object.
  • This becomes pivotal: a mere fund not founded on a contract among members is not an “association.”
• Cambridge Gas Transportation v Navigator [2006] UKPC 26 and Parmalat Capital Finance v Food Holdings [2008] UKPC 23 (paras 61–62):
  • Authorities describing winding up as a collective enforcement process against the debtor’s assets, culminating in pari passu distributions to creditors.
  • These cases frame the English winding-up process as presupposing an entity that owns property and owes liabilities.
• Re Witney Town FC [1994] 2 BCLC 487 and Re William Denby & Sons Sick and Benevolent Fund [1971] 1 WLR 973 (para 76):
  • Illustrate that courts have inherent jurisdiction to wind up or distribute certain funds or clubs without invoking the 1986 Act.
  • Used to caution against conflating any court-ordered distribution mechanism with the statutory winding-up regime.
• Re Russian & English Bank [1932] 1 Ch 663 (para 45):
  • Advanced by the Council as a basis for a protective use of winding up where other remedies might be inadequate; rejected for lack of evidential foundation and, ultimately, unnecessary to decide.

Collectively, these authorities steer the court away from a purely linguistic reading of “association” and toward a functional, context-sensitive interpretation tethered to the nature of the winding-up remedy.

Legal Reasoning

Snowden LJ structures the reasoning in two connected strands: what counts as an “association” in the winding-up context, and whether the English winding-up process can conceptually apply to the Sub-Fund.

1. “Association” requires a contractual nexus among persons (paras 58–60, 66–71):
   • While the word “association” is linguistically broad, the winding-up cases narrow it to bodies founded on consensual contracts among members regulating their relations inter se in pursuit of a common object (Caledonian).
   • The Sub-Fund is not a body of persons at all; it is a segregated pool of assets owned and managed by the umbrella company (KMG SICAV-SIF-SA). Investors are shareholders of the umbrella company; they are not “members” of the Sub-Fund and share no contractual nexus inter se constituting an association.
   • Articles and offering documents confirm the Company is a single legal entity; sub-funds are separate portfolios for ring-fencing among shareholders, not separate legal persons (paras 8–15, 67–71).
2. English winding-up presupposes a debtor’s estate, its creditors, and (potentially) members (paras 61–64, 72–74):
   • Statutory liquidation (s 143(1) IA 1986) is a collective enforcement against the debtor’s property for the benefit of its creditors, with any surplus to those entitled.
   • The Sub-Fund has none of the attributes required for that process:
     • No separate property: assets belong to the Company.
     • No creditors: the Sub-Fund cannot incur obligations.
     • No management: nothing for a liquidator to displace or control at Sub-Fund level.
   • If any winding up could apply, it would be to the umbrella company (the legal person that owns the property and has creditors), not the compartment.
   • The debate about “contributories” (s 226) is immaterial: their existence is not a precondition to jurisdiction, and in any event there are none at the Sub-Fund level (paras 64–65).
3. Luxembourg judicial liquidation of a compartment is not determinative (para 76):
   • That Luxembourg law permits a court-ordered liquidation of a compartment when regulatory authorisation is withdrawn says nothing about Parliament’s intent regarding English statutory winding up.
   • The Luxembourg process is not shown to be the same as an English collective enforcement for creditors under the 1986 Act; English law also has non-statutory routes for distributing funds, underscoring that not all liquidations are “winding-up” under the Act.
4. Other grounds (contingent creditor and discretion) were unnecessary (paras 77–81):
   • Even if there were recoveries, any claim would run through the Company, not the Sub-Fund; any creditor status of the Council would be in relation to the Company under Luxembourg law via shareholder rights, not vis-à-vis the compartment.

Impact and Future Significance

The decision has immediate and wider implications for cross-border investment fund disputes and insolvency strategy:

• Umbrella fund compartments are not “unregistered companies”:
  • Investors cannot use sections 220–221 IA 1986 to wind up a foreign SICAV-SIF sub-fund in England. Compartments without legal personality and without their own creditors are outside the English winding-up jurisdiction.
• Focus on the correct legal person:
  • Where relief is sought, the proper target is the umbrella company (if at all)—the entity that owns the assets, owes the obligations, and has the governance organs a liquidator could supplant.
  • This aligns with fund constitutions that create ring-fenced pools of assets for shareholder classes but do not create separate legal persons.
• Remedial pathways shift to the home jurisdiction:
  • For Luxembourg SICAV-SIFs, remedies will generally lie under Luxembourg law:
    • Company-level insolvency or reorganisation where appropriate.
    • Compartment-level measures available under the Law of 2007 (e.g., judicial liquidation) if statutory preconditions are met.
    • Company law claims (including claims against directors, managers, advisers) in the name of the company; any surplus distribution flows through shareholder rights in the Articles.
• Limits on creative use of English insolvency jurisdiction:
  • The Court reiterates that the 1986 Act is not a general investigatory tool for amorphous asset pools. Statutory liquidation applies where there is a debtor with property and creditors; otherwise, look to non-statutory mechanisms or the proper foreign processes.
• Guidance for structuring and due diligence:
  • Institutional investors should price and plan for the jurisdictional reality: investment via compartments often means remedies are mediated through the umbrella company and its home law.
  • Fund documents limiting recourse to compartment assets do not create a separate “association” for English winding-up purposes.
• Reaffirmation of the St. James’ Club/ITC test:
  • “Association” remains tethered to bodies Parliament could reasonably have intended to subject to English winding up—those with a contractual membership structure, their own property, and a governance apparatus that can be displaced by a liquidator.

Complex Concepts Simplified

• Unregistered company (IA 1986 s 220):
  • A body that is not incorporated under the Companies Act 2006 but can be wound up under the Insolvency Act if it is a “company” or an “association” in the statutory sense. The term does not cover every collective entity; the court asks whether Parliament intended that kind of body to be wound up.
• Association:
  • Not merely any group of people. For winding up, it generally means a body founded on a consensual contract among its members regulating their relations for a common purpose, with identifiable property and (potentially) liabilities.
• Dedicated Fund/Compartment (SICAV-SIF):
  • A segregated pool of assets within an umbrella company. It is not a separate legal person. The company owns the assets; investors hold shares in the company linked to the compartment’s performance. Rights and recourse are typically limited to that pool but remain rights against the company.
• Winding up by the court (IA 1986):
  • A collective enforcement process whereby a liquidator gathers and realises the debtor’s assets, pays creditors pari passu, and distributes any surplus to those entitled (usually members). It presupposes a debtor with its own property, creditors, and governance to be displaced.
• Contingent creditor:
  • Someone who may become a creditor upon occurrence of a future event (e.g., declaration of a redemption or surplus distribution). Here, any such status for the investor would be against the umbrella company, not the compartment.
• Contributories (IA 1986 s 226):
  • Persons liable to contribute to the company’s assets in a winding up. Their existence is not a precondition for jurisdiction, but the absence of any plausible “contributories” at the compartment level underscores why a compartment is not a proper subject of English winding up.

Conclusion

The Court of Appeal has delivered a clear, principle-led answer to a modern fund-structuring problem: a SICAV-SIF “Dedicated Fund” is not an “association” within section 220 of the Insolvency Act 1986 and cannot be wound up under section 221. The decision turns on two interlocking propositions:

• “Association” in the winding-up context requires a consensual membership body capable of bearing assets and liabilities and amenable to the statutory liquidation process; and
• English statutory winding up is a creditor-collective remedy applied to a debtor’s estate—something a compartment without legal personality, property, creditors, or governance simply is not.

For investors in umbrella fund structures, the practical message is equally clear: look to the umbrella company and its governing law for remedies. The availability of foreign compartment-level judicial liquidations does not open the door to English winding up of compartments. This judgment thus fortifies the St. James’ Club/ITC line of authority in a contemporary setting, providing certainty for international fund structures and guiding insolvency practitioners and investors on the proper forum and subject for relief.