English High Court Follows BVI Case, Lau V Chu, To Confirm The Test For Just And Equitable Winding Up

• Published date: 21 April 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Shareholders
• Law Firm: Harneys
• Author: Ms Megan Elms and Peter Ferrer

In the recent decision in Re Klimvest Plc [2022] EWHC 596 (Ch), HHJ Cawson QC, sitting as a Judge of the English High Court, ordered that the respondent company, Klimvest, be wound up on just and equitable grounds pursuant to section 122(1)(g) of the Insolvency Act 1986. In his judgment, he drew heavily on the Privy Council case of Lau v Chu [2020] UKPC 24, which reinstated the BVI Commercial Court's first instance decision and endorsed the initial findings of Justice Kaye.

The petitioner was a minority shareholder in the company, one of its founding members, and its former director. He sought to wind up the company on multiple grounds, including that following the sale of the company's business and assets, the company had lost its substratum and was no longer fulfilling its purpose.

The petition was opposed by another shareholder. It argued that the company's substratum had changed over time, such that while initially, its purpose was to develop software, it was now to operate as a holding company and to use the proceeds of the asset sale to invest in new ventures.

The remedy of just and equitable winding up is well-established as being one of last resort, only to be used where there is no other remedy available to the petitioner. It has therefore been used sparingly in the BVI, England, and Wales.

However, HHJ Cawson QC's judgment suggests just and equitable winding up could be more widely accessible. Following Lau, he confirmed that once the petitioner has established their entitlement to the equitable relief, it is for the respondent to establish that there is "some other available remedy" which the petitioner "unreasonably" failed to pursue. It is not sufficient that there is any alternative remedy - it must be one that the petitioner ought reasonably to have pursued. HHJ Cawson also cited the Privy Council's endorsement of previous...