Just and Equitable Winding Up Petition Advice

Shareholders in a company may petition for the winding up of a company if there has been a breakdown in the mutual trust and confidence of the shareholders which is impending the management of the company and they believe that it would be just and equitable for a company to be put into liquidation and cease trading. If you are considering making a petition, it’s a good idea to seek legal guidance on how to do so, as the petition process is complex and needs to be closely followed.

We are leading experts specialising in insolvency proceedings. Our experienced City of London solicitors and barristers regularly assist shareholders facing in various insolvency matters; individuals served a statutory demand; or creditors owed money and considering issuing a winding up petition

What is a just and equitable winding up petition?

A petition to wind up a company on a just and equitable ground is a discretionary statutory remedy provided by sections 122–125 of the Insolvency Act 1986 (IA 1986). Shareholders of a company may petition for the winding up of a company incorporated under the Companies Acts 1985 and Companies Act 2006 (CA 2006).

It should be noted that the power of the Court to wind up a company on just and equitable grounds is a discretionary remedy and as such, the Court will consider each application on its own merits. The Court will weigh up all the relevant factors whilst having regard to the equity of the outcome and decide whether it is appropriate to take such drastic actions.

What is the legal basis for a just and equitable winding up petition?

This is a statutory remedy and the primary statutory source is IA 1986, s 122(1)(g), which states:

(1) A company may be wound up by the court if –

(g) the court is of the opinion that it is just and equitable that the company should be wound up.’

IA 1986, s 122(1)(g)

Who can present a just and equitable winding up petition?

Pursuant to IA 1986, s 124, the winding up of a company on the just and equitable ground may be presented by:

  • The company.
  • The directors of the company (pursuant to a board resolution passed by a majority) or
  • By all of the directors acting unanimously (in the absence of a board resolution pass by the majority).
  • By any creditor or creditors of the company (including any contingent or prospective creditor or creditors).
  • Shareholders and other persons liable to contribute to the assets of a company in the event of it being wound up so long as the number of members is reduced below two.

Grounds for a just and equitable winding up petition

Given that a just and equitable winding up petition is a discretionary remedy, the Court will often take into account whether the petitioner has suffered unfair prejudice (for example, material failure of the company to abide by the articles or the breach of a further contractual agreement). Although the categories of just and equitable grounds are not closed, commonly petitions rely upon one or more of the following bases:

  • There has been a breakdown of mutual trust and confidence between ‘quasi-partners’;
  • Deadlock (e.g. where the minority holds 50% of the voting rights);
  • The Company has been mismanaged by the Directors or other members of the company;
  • Exclusion from management (e.g. failure of the company directors to consult the minority in respect of the management of the company or provided timely or adequate management information).

Delay in seeking a just and equitable winding up petition

Any delay on behalf of the petitioner may potentially amount to waiver or acquiescence in relation to changes in the way the affairs of the company are conducted by the majority. If you are considering making a petition, it’s a good idea to seek legal guidance on how to do so as soon as practicable.

Specialist London Winding-up Petition Lawyers

We’re masters of insolvency dispute litigation. We are a specialist City of London law firm made up of Solicitors & Barristers. We’re based in the Middle Temple Inns of Court (next to the Royal Courts of Justice where the High Court and Central London County Courts are based).  We’re experts in dealing with matters surrounding insolvency in particular our team have unparalleled experience at both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.

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