What does ‘Just and Equitable Grounds’ mean in a Winding Up Petition?
A winding up petition issued on ‘just and equitable grounds’ is a different type of petition to a standard creditor’s petition. Rather than being issued by a creditor of a company, a ‘just and equitable’ petition is issued in the case of a shareholder dispute. If there has been a breakdown in the mutual trust and confidence of the shareholders which is having a detrimental impact on the company, the shareholders can petition the court to wind up the company on just and equitable grounds.
Who can Present a ‘Just and Equitable’ Petition?
This type of petition can be presented by the company shareholders or the directors if a board resolution has been passed by a majority of the creditors and shareholders of the company. A shareholder can only present this type of petition if they have been a shareholder of the company for at least six of the 18 months preceding the presentation of the petition, or if they are the only, or an original, shareholder.
Why Might you do This?
An example of a scenario in which a just and equitable winding up petition might be presented is in the case of a disagreement about the way a company is run, or the direction a company is going in. If this dispute cannot be resolved, a winding up petition can be presented to close the company down. However, the decision to wind up the company is down to the discretion of the court, so, just because a petition has been issued, it does not automatically mean the company will come to an end.
How does the Court make its Decision?
The court will take some different factors into account when deciding whether to make a winding up order. This includes:
- How the company was run;
- Whether the court believes it should intervene in the affairs of the company;
- Whether there is any other viable solution;
- Whether it is ‘just and equitable’ to wind the company up.
If the court deems that there are some factors at play, such as the shareholders are in deadlock, there has been a breakdown in mutual trust and it sees no alternative remedy, a winding up order will usually be made.
For more information about just and equitable winding up petitions, please call our team on 08000 746 757 or email: [email protected] today.