The corporate watchdog has moved to wind up internet firm Uglii and several of its subsidiaries while alleging the firm breached company laws, in a move that may result in thousands of the firm's shareholders losing their investments.

The move by the Australian Securities and Investment Commission was prompted by an investigation by Fairfax Media that alleged the firm and its now former chief executive, John Knorr, had engaged in serious corporate misconduct by misleading investors - including thousands of Victorians - to generate at least $25 million for his struggling online search firm.

Mr Knorr allegedly fabricated or grossly exaggerated his claims about Uglii's activities and potential earnings.

Since those revelations, the company has been in free fall, with some staff resigning and others conducting lengthy interviews with ASIC investigators about the conduct of Mr Knorr and the operations of Uglii.

The current chairman of Uglii is a former Victorian policeman, Bruce Dawkins, who, in an email to Fairfax Media, previously attacked shareholders who complained about the company's activities.

Another Uglii director is Heather Knorr, Mr Knorr's wife.

On Friday, ASIC served notice on senior company officers of its intention to wind up Uglii in a federal court action, having recently demanded that Uglii hand over documents.

ASIC is seeking to have liquidators take control of Uglii and several related firms in an attempt to preserve the company's remaining assets and conduct further investigations.

In a media statement, ASIC said on Monday that it was alleging "that the [Uglii] companies have been involved in multiple contraventions of corporations legislation and are not complying with their obligations under that legislation."

ASIC also said it "is concerned that the companies are not being properly managed and are insolvent or likely to become insolvent."

Among Uglii's shareholders are thousands of unsophisticated investors from the Latrobe Valley and Melbourne, where Uglii has offices.

They include pensioners and many small business owners who decided to invest in Uglii after hearing Mr Knorr's claims that it would generate hundreds of millions of dollars in revenue and transform the world's leading economies.

Among the Uglii-linked firms that ASIC is seeking to wind up is Traralgon Technology Holdings, which is directed by prominent Latrobe Valley Surgeon Dr George Owen.

Late last year, Mr Owen was filmed spruiking to shareholders claims that Uglii shares were likely rise in value. Dr Owen has never responded to Fairfax Media's attempts to contact him.

Despite the media revelations, highly questionable claims about Uglii have continued to be made by the firm's representatives, including Mr Knorr.

Earlier this year, Mr Knorr's lawyer claimed in a letter that Uglii had struck a business deal with a high-ranking Chinese government official in an attempt to back up claims made to shareholders that Uglii had struck a "deal" with the Chinese postal service.

However, when Fairfax Media provided details of Mr Knorr's claims to China Post, it dismissed the claim and threatened to take legal action against Uglii.

Communications giant Nokia also denied Mr Knorr's claims that Nokia had conceded to Uglii that it had breached Uglii's patents.

Had such a concession actually been made by Nokia, it may have meant that Uglii would receive a huge pay out from Nokia.

Late last year, global bank HSBC sent Mr Knorr a formal legal letter warning him that his claims of striking a partnership with HSBC were false and misleading.

Mr Knorr has had a chequered business career.

Two of his firms have recently been the subject of court action initiated by the tax office, which is owed more than $1 million by Knorr-linked firms.

One of the firms is in the hands of liquidators, who are investigating the legitimacy of transactions between Uglii companies that may yet prompt more court action.

In 2011, liquidators blamed the collapse of another Uglii-linked firm on Mr Knorr's poor management.

Two years earlier, a firm managed by Mr Knorr was found by the Federal Court to have breached the Corporations Act by unlawfully selling $1.3 million worth of shares.

Fairfax Media has been flooded with complaints about Uglii from former employees, shareholders and creditors.

In January, Mr Knorr's lawyer, Stefan Briggs, wrote to Fairfax Media stating that Mr Knorr is "a man of significant standing and repute in the Traralgon local community and globally because of the Uglii system".

Mr Knorr denies any wrongdoing and has declined to answer detailed questions from Fairfax Media. He recently issued defamation proceedings against Fairfax Media.

Mr Dawkins had declined to answer questions previously sent by Fairfax Media about his appointment as a director of Uglii.