WS6: Just and Equitable Winding Up

Question 1

What happens when a court orders a just and equitable winding up?

Answer 1

Any action e.g. disposition of property, transfer of shares, alteration in status of members is void. Accounts frozen.

Question 2

What principles re J and E winding up emerged from Ebrahimi v Westbourne Galleries?

Answer 2

Cases should be considered individually as court has wide discretion but overarching principle is that successful petitions happen when relationship between directors / shareholders has broken down to such an extent that company cannot be run.

Question 3

What are grounds for a J and E petition

Answer 3

Substratum has failed; objects failed or been fulfilled [less relevant now]
Fraud
Deadlock
Justifiable loss of confidence in company management.
Exclusion from participation in a small private company where there was a relationship based on mutual confidence.

Question 4

What are three elements of a petition for J and E winding up where reason in exclusion from participation in small private company with relationship based on mutual confidence?

Answer 4

• Personal relationship and mutual confidence
  -Understanding that all shareholders will participate in management
  -Restriction on transfer of members’ interests preventing petitioner from leaving.

‘An obligation so basic that, if broken, the conclusion must be that the association must be disolved’

Question 5

Who can bring a J and E petition?

Answer 5

A contributory e.g. every past and present member who can show a tangible interest in the company.

Must prove surplus is likely on winding up, or they would avoid a disadvantage / get an advantage on winding up

Petitioner’s conduct relevant