East Riding of Yorkshire Council v KMG SICAV SIF GB Strategic Land Fund [2025] EWCA Civ 1137
Introduction
When offshore umbrella fund structures fail and investors are left empty-handed, where should they turn?
A pension fund administrator's attempt to answer that question through the English courts has resulted in an important judgment from the Court of Appeal.
In East Riding of Yorkshire Council v KMG SICAV-SIF-GB Strategic Land Fund [2025] EWCA Civ 1137, the Court of Appeal held that a ring-fenced sub-fund of a Luxembourg special investment company falls entirely outside the winding-up jurisdiction of the English courts. For insolvency practitioners, the decision marks the boundary, and the limits, of that jurisdiction when applied to a compartmentalised fund structure with no distinguishable legal personality.
Background
KMG SICAV-SIF-SA (the Company) was a Luxembourg-incorporated umbrella vehicle regulated by the CSSF (the Luxembourg equivalent of the FCA). It operated through a series of dedicated funds, separate asset pools managed by the Company's board, each corresponding to a distinct class of shares but none possessing independent legal personality. The KMG SICAV-SIF-GB Strategic Land Fund (the Sub-Fund) was one such pool, launched in 2010 with the aim of generating long-term capital growth from UK strategic land assets.
In August 2014, the Council invested £20million of pension fund money by subscribing for Class C Sterling Shares in the Company. In June 2016, calculation of the Sub-Fund's net asset value was suspended following a significant loss on a land option. By February 2019, the Board of the Company resolved to liquidate the Sub-Fund (under Luxembourg procedures). In December 2020, shareholders were informed that the liquidation had produced nothing and that there would be no return of capital.
The UK proceedings
In May 2021, the Council petitioned for a compulsory winding-up order, arguing that the Sub-Fund was an "unregistered company" within section 220 of the Insolvency Act 1986 (the Act) and thus susceptible to winding-up under section 221 of the Act. The asserted ground was the statutory one under section 221(5)(a): that the body had ceased to carry on business or was doing so only for the purpose of winding up.
The petition failed at both earlier stages.
At first instance, Deputy ICC Judge Kyriakides held that the Sub-Fund lacked the hallmarks Parliament must have had in mind, as it had no legal personality, no capacity to contract, no management of its own, and that the Council, in any event, could not demonstrate it was a contingent creditor of the Sub-Fund (as opposed to the Company).
Richard Smith J went on to dismiss the first appeal, agreeing that there was no authority which extended section 220 to a body that was neither a company nor an association, and affirming the lower court's analysis of the Sub-Fund's characteristics.
The court of appeal decision
The Court of Appeal, in a unanimous judgment delivered by Lord Justice Snowden, dismissed the second appeal by the Council.
Drawing on the principles established in Re The St. James' Club (1852) and Re International Tin Council [1989] Ch 309, the Court of Appeal confirmed that "association" for the purposes of section 220 carries a narrower meaning than its ordinary language might suggest. For a body to qualify, it must be one whose existence is grounded in contractual relationships between its members — not merely a shared interest or administrative convenience.
The Sub-Fund failed entirely on this analysis. It was neither a legal entity nor an arrangement between persons who owed obligations to one another. Its assets were owned and controlled throughout by the Company. Investors held shares in the Company and had rights against the Company under the articles. In contrast, they held no direct proprietary interest in the Sub-Fund's assets themselves.
The Court of Appeal also emphasised that the compulsory winding-up procedures under the Act were inapplicable. That process is designed to enforce debts against a debtor's estate for the benefit of its creditors. The Sub-Fund was incapable of being a debtor, could hold no liabilities, and a liquidator appointed to it would have found no management powers to assume. The appropriate target for any insolvency process, had one been available, would have been the Company, not the Sub-Fund.
Key takeaways
The judgment emphasises that the winding-up regime under English law is a collective enforcement mechanism directed at a debtor’s property for the benefit of its creditors.
Entities that lack a distinct legal existence or a defined set of creditors and contributories fall outside that framework.
Legal personality is the threshold question. A compartment or sub-fund that cannot contract, own assets, or incur obligations cannot be wound up as an unregistered company, and in those circumstances investors are creditors of the umbrella company, not the fund itself. As such, insolvency or enforcement proceedings should be directed at the umbrella company. Action taken against the sub-fund alone may be jurisdictionally misconceived.
It is therefore important to investigate the governance and structure of any potential targets for formal insolvency proceedings at an early stage. In doing so, you should also consider the foreign law remedies/processes which may be available (or which may limit your options under English law). As an established member of Interlaw, Trowers & Hamlins has partnerships with an elite global network of international law firms across 150 cities worldwide and is therefore well placed to assist on any cross border insolvency issues (in conjunction with our Interlaw partners).
