Company law revision question and answer

Section 219 (f) of the Companies Act provides that “a company may be wound up the court, if the court is of the opinion that it is just and equitable that the company should be wound up”.

Give a general account of the circumstances which will influence the court in exercising its discretion under this section illustrating your answer with relevant judicial authority.
ANSWER
Although it has been suggested that there is an exhaustive list of circumstances that may fall within the scope of the “just and equitable” clause, judicial authority is emphatic that no such list is feasible. Courts have ordered the winding up of companies on the ground that it is just and equitable to do so in various circumstances e.g.
Failure of substratum:

This is the principal or paramount object of the company and it is deemed gone if it is no longer attainable. In re German Date Coffee Co [1882] it was held that since it was impossible to acquire a German patent, the main object of the company, it was just and equitable to wind up the company. A similar holding was made in re Baku Consolidated Oil Fields Co.
Fraudulent or illegal purpose:

In re Thomas Edward Brinsmead and Sons [1897] it was just and equitable to wind up a company if it was evident that it had been formed to pursue a fraudulent or illegal purpose.

Loss of confidence in management:

It is just and equitable to windup a company if members have justifiably lost confidence in the manner and probity with which its affairs are being managed. There must be a consistent course of conduct on the part of the management which justifies the petitioners loss of confidence. As was the case in Loch V JohnBlackwood.
Expulsion or exclusion from management:

The inequitable exclusion or expulsion from the management of a company‟s affairs renders it liable to be wound up under the just and equitable ground. In Ebrahim VWestbourne Gallaries Ltd [1973] the petitioner had been unfairly excluded from the management of the company while in re Lundie Brothers Ltd [1965] the petitioner had been unfairly expelled from the Company‟s management.
Company is a “bubble”:

These are circumstances in which there is no bona fide intention on the part of the directors to pursue the declared objects of the company or pursue them lawfully. It was so held in re London and County Coal [1867].
Oppression of minority:

It is “just and equitable” to wind up a company if it is established that its affairs are being conducted in a manner oppressive to the minority.
Deadlock in management and membership:

If both organs of the company cannot function in any material respect reason of a deadlock or otherwise, it is just and equitable to wind up the company. This generally arises where the company‟s shares and voting rights are equally divided between two persons or groups of persons with irreconcilable differences. As was the case in re Yenidje Tobacco [1916] as well as in re Modern Retreading Co. Ltd.
Facts would justify dissolution of partnership:

This circumstance can only be relied upon in cases of small private companies. It is based on the premise that such companies are in substance partnerships and hence grounds that justify the dissolution of a partnership may equally apply in the winding up of the company. This argument was relied upon in Ebrahimi VWestbourne Gallaries Ltd [1973].

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