Discuss the various grounds upon which the Court can order that a company be wound up compulsorily.
B.H McPherson defines winding-up as a process whereby the assets of a company are collected and realised, the resulting proceeds are applied in discharging all its debts and liabilities, and any balance which remained after paying the cost and expense of winding-up is distributed among the members according to their rights and interests or otherwise dealt with as the constitution of the company directs. S213 of the 1963 Act sections a - f specify the grounds for petitioning for a compulsory winding up. The main grounds include companies that have special resolutions, failure to commence business within a defined time limit, lack of members and oppressive operation of the powers of directors.
The most frequently relied upon ground for petitioning to have a company wound-up is S213(e) of the Companies Act 1963, namely that the company is “unable to pay its debts”. The mere existence of a debt however is no guarantee that the court will make a winding – up order. Another interesting ground is where the court considers it "just and equitable to do so" under s213(f). These two areas will be the main areas of focus considered.
S213(e) - Inability to pay debts
The grounds upon which a creditor can petition for winding-up of a company are set out in S.213 c – f. However for a creditor to be able to present a petition, he must have a present liquidated debt due and owing to him, and the debt must be owed to the creditor himself. S213(e) is as Samuel points out the ground that most petitions of creditors are based.
Section 213 of the CA 1963 is a discretionary provision and even though a person may prove conclusively that a company is unable to pay its debts, there is no automatic right to a winding-up order. The discretionary nature was stressed by McCracken J in Re Genport where he held that it is quite clear that this remedy is not mandatory and...
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