Just and Equitable Winding Up

A just and equitable winding up is a serious action. It involves the company being wound up, causing that company to cease operation. Although it is a potential remedy for a successful unfair prejudice claim, it should never be the primary remedy. If another remedy is available, such as a buy-out, that would be preferred by the court.

As a general rule for seeking a just and equitable winding up, either as a remedy for unfair prejudice or as a claim in its own right, a claimant must show that the company has enough cash, following payment of any debts that the company owes to creditors, to distribute to the shareholders.

Although a court will rarely order a company to be wound up, there are instances where a winding up is just and equitable, other than simply as a potential remedy for an unfair prejudice claim.

A deadlock is such an instance. This is where there is a 50/50 split in the management of the company, and neither director has a casting vote to decide the outcome. In such a case, the court might order that the only possible outcome is for the company to be wound up.

Alternatively, where the trading purposes or objectives for which the company was set up has changed, or can no longer be carried out, the court might order that company to be wound up.