Minority Shareholder Protection: Just and Equitable Winding Up Explained

In shareholder disputes, particularly where relationships have irretrievably broken down, the courts have the discretion to grant a winding-up order on the “just and equitable” ground under section 122(1) (g) of the Insolvency Act 1986 (IA 1986). Although traditionally viewed as a remedy of last resort, the recent case of Dosanjh v Balendran [2025] EWHC 507 (Ch) (In re Webb Estate Developments Ltd) demonstrates that the court will not hesitate to exercise this power when a functional deadlock and a loss of mutual trust render the continued operation of the company unworkable. The decision provides valuable insight into the balance between statutory remedies, judicial discretion, and equitable considerations in resolving corporate deadlock.

What Is a Just and Equitable Winding-Up Petition?

The petition for winding up filed under section 122(1) (g) of the Insolvency Act 1986 (IA 1986), permits winding up on the grounds of “just and equitable” circumstances. However, Section 125(2) limits this remedy if the court believes an alternative remedy exists and that the petitioner has acted unreasonably by not pursuing it. Relevant case law, including Fulham FC v Richards [2012] Ch 333 and Chu v Lau [2020] UKPC 24, outlines a three-stage test to determine whether winding up is just and equitable:

• Is the petitioner entitled to any relief?
• If yes, would winding up be just and equitable in the absence of alternative remedies?
• If yes, has the petitioner unreasonably failed to pursue those remedies?

Dosanjh v Balendran [2025] EWHC 507 (Ch)

Mr Dosanjh and Mr Balendran were initially business partners in an LLP and later became co-owners of a limited company. Their dispute centred on the nature of £7,000 monthly payments, with Mr Dosanjh asserting they were loan repayments, while Mr Balendran maintained they were reimbursed expenses. The relationship deteriorated due to disagreements over the company accounts, conflicting filings with Companies House, and hostile communications between the two parties.

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What Kind of Conduct Justifies a Just and Equitable Winding-Up?

The court found an irretrievable breakdown in trust and confidence, which was evidenced by dishonest conduct. For instance, Mr Balendran proposed the sale of a property to a company in which he had an interest without disclosing his stake. Corporate governance was paralysed by persistent disagreements, preventing proper management, particularly concerning the company’s assets, leading to a functional deadlock.

What Alternative Remedies Must Be Considered Before a Winding-Up Petition?

Under Section 994 of the Companies Act 2006, a buyout is typically the preferred remedy for cases of unfair prejudice. However, Mr Dosanjh did not wish to buy out Mr Balendran, and Mr Balendran’s offer to purchase Mr Dosanjh’s shares was unrealistic. The proposed buyout was contingent on uncertain property valuations and bridging loans, which further delayed proceedings, indicating that no feasible alternative remedy was available.

Can a Winding-Up Petition Be Denied Under the ‘Clean Hands’ Doctrine?

Mr Balendran argued that Mr Dosanjh should be denied relief due to the filing of unauthorised accounts. The court rejected this claim, noting that Mr Dosanjh’s actions were aimed at preventing the company from being struck off and were a response to Mr Balendran’s obstruction. This decision reaffirmed the principle from Harding v Edwards that “clean hands” does not require complete blamelessness.

What Are the Commercial Consequences of Winding Up a Company?           

Although winding up may lead to lower returns from the company’s assets, the court granted the winding-up order. The dysfunction within the company made its continued operation unfeasible, and further litigation would likely diminish its value. In light of the impasse, winding up was deemed the only viable solution.

When Should Minority Shareholders Consider a Winding-Up Petition?

This case reaffirms that winding up remains a valid remedy in extreme shareholder disputes. It highlights that, even when Section 994 relief is generally preferred, the courts are willing to grant a winding-up order when there is severe dysfunction within the company. The threat of a winding-up petition may also serve as a strategic tool in negotiations for minority shareholders.

Specialist Legal Support for Winding-Up and Insolvency

Insolvency law is highly complex and demands specialist expertise. Winding-up petitions are technical proceedings rarely handled by general practitioners, and attempting to navigate them without expert support can have serious consequences. Our experienced insolvency solicitors and barristers represent both creditors and debtors in a wide range of matters, from major commercial disputes to sensitive personal cases. Based in Middle Temple Chambers, we offer nationwide representation and deliver strategic, effective advocacy at all stages.

Legal Support for Shareholders Facing Unfair Prejudice

We understand the urgency when your rights as a shareholder or creditor are at risk. Whether you are facing a winding-up petition, corporate deadlock, or unfair prejudice, our expert team responds swiftly and effectively. Skilled in negotiation and litigation, our solicitors and barristers are committed to achieving the best outcome. We offer nationwide support through in-person or remote consultations. If your investment is threatened by exclusion, undervalued buyouts, or mismanagement, we take decisive legal action—pursuing remedies, including winding-up on just and equitable grounds where appropriate.