Josiah and Joachim and others incorporated a public company to carry on the business of exporting flowers to Europe and the United States. The company‟s shares attracted a heavy subscription and the company has over 70 members whose shares are fully paid. For the last 5 years, the company has made enormous profit and members are very happy with their investment. However, recently, the European Union and the United States excluded Kenyan flowers from the market on the ground that they contained dangerous levels of poisonous chemicals. The company cannot now export flowers to Europe or the United States and shareholders are at a loss. Oliver and Ben, who are shareholders have approached you for advice on what action to take. Advise them.

 This problem is based on the principles relating to failure of a company‟s principal or paramount object.

In this case it is evident that the company‟s substratum has disappeared since it can no longer export flowers to the European union or the United States the sole object it was incorporated to pursue.
 It is apparent that the company cannot embark on any other object as the same is likely to be ultra vires.

My advice to Oliver and Ben is to petition for the compulsory winding up of the Company on the ground that it is just and equitable that the company be wound up. This is because failure of the substratum is one of the circumstances in which a company may be wound up under the just and equitable ground.

My advice is based on the decision in re German Date Coffee Co. Ltd. where a company was formed to acquire a German patent to manufacture coffee from dates as a substitute. However it could not acquire a German patent. A shareholder petitioned for the winding up of the company on the ground that it was just and equitable. It was held that since the company‟s substratum had disappeared altogether it was just and equitable to have it wound up.

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