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A just and equitable winding up petition is a different type of petition to a standard creditor’s petition. It is a bespoke winding up petition designed to deal with shareholder disputes in a company.

At Francis Wilks & Jones we regularly advise shareholders subject to disputes and we would recommend that you click here to access our dedicated shareholder advisory pages and speak to a shareholder expert of you require assistance on just and equitable winding up petitions.

Winding up on just and equitable grounds

Under Section 122(1)(g) of the Insolvency Act 1986 it is open to the court to wind up a company on just and equitable grounds where there has been a breakdown in mutual trust and confidence which is impeding the management of the company.

However, the power of the court to wind up a company on just and equitable grounds is a discretionary remedy and therefore

  • the court will consider each application subjectively and weigh up all factors having regard to the equity of the outcome; and
  • whether it is appropriate to take such a action which may often be against the interests of one or more of the shareholders.

Petitions for winding-up a company on just and equitable grounds may be presented by

  • the company;
  • the directors of the company pursuant to a board resolution passed by a majority;
  • contingent and respective creditors of the company;
  • shareholders; and
  • other persons liable to contribute to the assets of a company in the event of it becoming insolvent.

The unfair prejudice remedy (referred to below) is often pursued by a minority shareholder in order to protect his/her interest in the relevant company.

A petitioner seeking to bring a winding up petition on just and equitable grounds must either be the only shareholder of the company, an original allottee of shares or have been registered as a member for at least 6 months out of the 18 months preceding the date of presentation of the petition. Furthermore, a petitioner must show an interest in having the relevant company wound-up.

Circumstances which might lead to a claim

There are a number of situations where it would be just and equitable to wind up a company

  • deadlock between 50/50 shareholders (who will often also be directors of the company);
  • mismanagement of the company by one party; and/or
  • excluding the proposed petitioner from management.

It is important to note that the Court will not make a winding up order if it deems that there is some other remedy available to the petitioner and it is therefore unreasonable for that petitioner to seek the winding-up of the company.

Such matters are often both legally and factually complex therefore it is important that a petitioner proposing to seek a winding up order on just and equitable grounds seek independent legal advice from specialist legal advisers.

All parties considering such an action should be aware that the courts will prefer to make an order in terms that one party purchase the other party’s shares for a specific amount (often the subject of expert evidence), rather than the more draconian order for winding-up of the company on just and equitable grounds.

Francis Wilks & Jones is the county’s leading firm of winding up petition solicitors. We often deal with the complexities of company and shareholder disputes, including just & equitable winding up petitions. Call now to speak to one of our experts.

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