How To Rescind A Winding Up Order

The reason the rescission application was refused was because of timescale, trading was not to be resumed, nothing deemed exceptional in the case and no reason for the order to rescind the Winding Up Petition to be made:

The first point to make is that the extension of time required if the application is to proceed, over two years from a specified limit of five days, is extreme. Mr Ross accepts that there is no reported case in which an extension of anything like that amount has been granted. The fact that the Rules impose such a short limit is itself unusual, and emphasises that the jurisdiction is intended to be limited to cases in which it can be very quickly shown that the order for winding up was clearly inappropriate.

Such cases may no doubt include circumstances in which it can be clearly and swiftly shown that, contrary to the finding that formed the basis of the winding up order, the company is able to pay its debts, at least as they fall due, and to show that it is appropriate to permit it to continue to trade. In principle that might be done by injecting a sufficient amount of funds to enable it to be shown that, whatever the exact amount of liabilities, the company would be able to meet them- that is in effect what happened in Diamond Hangar. But they do not, in my judgment, extend to allowing a period, still less a protracted period, in which the existence and amount of the company’s debts can be investigated and established so that funds can be injected to pay them off in a piecemeal fashion. That is inherently unlikely to be capable of being established within the five day period provided, so the effect of allowing an extension of time to do so would not be to allow the purpose of the jurisdiction to be served, but to change that purpose into something wholly different.

Indeed if this application were allowed it would in effect create a jurisdiction for a winding up to be set aside in any case in which the debts proved (and the costs of liquidation) were in fact discharged however long it took to do so. Such a jurisdiction is explicitly provided for in bankruptcy, as one of the grounds for annulment, but not in winding up, and that is no doubt a deliberate policy choice by the legislature.

It follows that there is no good reason for the failure to comply with the time limit required. The non compliance was caused not because the applicant was inadvertently prevented from complying with the rule but because he was seeking to do something that the rule was not intended to allow.

Even if such a purpose was within the contemplation of the rule, it is a further indication that there is no good reason for failing to comply with the time limit that this is a second application- the shareholders had one opportunity to show the court that all debts had been paid, if that was to be relied on, but they failed or were unable to do so before the first application was heard.

Secondly, this is not a case in which the company is solvent and seeking to continue its trade. It was not trading at the date it was wound up and is not presently intending to resume trading, but to realise its assets (in the form of the cause of action) for the benefit of its members. It is not solvent, contrary to the assertions made by the applicant, because it has no funds of its own but only what is transferred or returned to it by its shareholder to meet its liabilities. It is not shown by the evidence that these funds belong to the company; indeed it must be assumed that the shareholders’ case is that funds were properly paid out to Mr Wilson and so are his property and are being returned by him as a voluntary act.

The circumstances are very different, in my judgment, from those in Diamond Hangar, which were held to be exceptional. In that case the company was actively trading and intended to continue to do so. There was a history of very substantial financial support for such trading by the principal shareholder, coupled with an undertaking to maintain that support in the future, subordinate the shareholder’s claims to those of other creditors and to make changes to management that were accepted as appropriate to avoid likelihood of similar cash shortages in the future.

It would be undesirable, in my judgment, to allow the present exceptional jurisdiction to be extended as it would be if an application such as this were allowed. Since creditors can only be paid from funds volunteered by the shareholders, it would be likely to lead to a situation in which the shareholders negotiate directly with the creditors on an individual basis, with the substantial advantage that each creditor can be told he is likely to realise nothing in the liquidation if he does not accept what the shareholder offers.

It may be said that that is in effect what may happen in an application to annul a bankruptcy, where the debtor may rely on third party funding, but it is the legislative policy to allow that, no doubt because of the particular consequences to an individual from his personal bankruptcy. The same does not apply to shareholders who insulate themselves from debts by trading through a limited company which they fail to fund sufficiently to pay debts when due.

Thirdly, this is not a case that can in my judgment properly be viewed as exceptional. In this context, the exceptionality referred to relates to the circumstances in which a company came to be wound up when, in the light of the facts as known to the court at the date of the hearing, that can be seen to be inappropriate. In this case, the circumstances were not exceptional at all- the directors and shareholders simply failed to provide funds to the company to deal with a claim by a creditor in good time to avoid the order being made, and now seek a second (or third) chance to do so. The exceptionality suggested is that it is not usual for shareholders to offer to discharge a company’s debts after winding up, but that seems to me to be no more than saying that it is unusual for the rescission application itself to be made.

Finally, there has not in my judgment been any good reason put forward why the order needs to be made. There is no business to preserve for the company, only a question of realisation of its asset. The shareholders say they may choose to pursue projects through the company in future but have advanced no reason why they would not be equally able to use some other vehicle. If the shareholders wish to pursue the cause of action, on the face of it that could be achieved by having it assigned to them, either by way of sale by the liquidator or, now that the winding up is concluded, by way of distribution to the members. Mr Ross was unable to suggest any reason why that could not be done, and when I asked why the application had been brought, could say only, on instructions, that the liquidator had requested that it should be made before he would consider an assignment.

What Next? Expert Advice Is Just A Click Away

If you have any questions, queries or concerns in relation to How To Rescind A Winding Up Order, then Contact Us as soon as possible for advice. Our expertise is at your fingertips.

Disclaimer

This post: How To Rescind A Winding Up Order is not legal advice and should not be relied upon as such. This post How To Rescind A Winding Up Order is provided for information purposes only. You can Contact Us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

[/vc_column_text][/vc_column][/vc_row]The Court identified the legal issues saying that the Directors had sought to address:

the principles identified by Barling J in Credit Lucky v National Crime Agency [2014] EWHC 83 (Ch), where he said this:

“31. The principles governing the Court’s exercise of its discretion to rescind a winding up order are conveniently listed in the judgment of Mr Philip Marshall QC, sitting as a Deputy High Court Judge, in Metrocab Limited [2010] EWHC 1317 at paragraph 36, in which reference is also made to a number of other relevant authorities, including Re Dollar Land (Feltham) Ltd. (1995) BCC 740, at 748D; Re Piccadilly Property Management Ltd. [1999] 2 BCLC 145; Wilson v. Specter Partnership [2007] BPIR 649, at 658); and Papanicola v. Humphreys [2005] 2 All ER 418, at 424). The principles are as follows (paraphrasing paragraph 36 to some extent):

(1) The power to rescind is discretionary and is only to be exercised with caution;

(2) the onus is on the applicant to satisfy the court that it is an appropriate case in which to exercise the discretion;

(3) it will only be an appropriate case where the circumstances are exceptional and those circumstances must involve a material difference from those before the court that made the original order;

(4) there is no limit to the factors that the court can take into account, and they may include changes since the original order was made, and significant facts which, although in existence at the time of the original order, were not brought to the court’s attention at that time; but where that evidence could have been made available, any explanation the applicant gives for the failure to produce it then or any lack of such an explanation, are factors to be taken into account;

(5) the circumstances in which the court’s power will be exercised will vary but generally where the rescission application involves dismissal of the winding up petition, so that the company is free to resume trading, the court will wish to be satisfied:

(a) that the debt of the petitioning creditor has been paid, or will be paid, that the costs of the Official Receiver or any liquidator can be paid, and that the company is solvent at least on the basis that it can pay its debts as they fall due;

(b) that the application has not been presented in a misleading way and the court is in possession of all the material facts and has not been left in doubt;

(c) that the trading operations of the company have been fair and above board, and there is nothing that requires investigation of the affairs of the company.”

Why The Rescission Was Refused?

The reason the rescission application was refused was because of timescale, trading was not to be resumed, nothing deemed exceptional in the case and no reason for the order to rescind the Winding Up Petition to be made:

The first point to make is that the extension of time required if the application is to proceed, over two years from a specified limit of five days, is extreme. Mr Ross accepts that there is no reported case in which an extension of anything like that amount has been granted. The fact that the Rules impose such a short limit is itself unusual, and emphasises that the jurisdiction is intended to be limited to cases in which it can be very quickly shown that the order for winding up was clearly inappropriate.

Such cases may no doubt include circumstances in which it can be clearly and swiftly shown that, contrary to the finding that formed the basis of the winding up order, the company is able to pay its debts, at least as they fall due, and to show that it is appropriate to permit it to continue to trade. In principle that might be done by injecting a sufficient amount of funds to enable it to be shown that, whatever the exact amount of liabilities, the company would be able to meet them- that is in effect what happened in Diamond Hangar. But they do not, in my judgment, extend to allowing a period, still less a protracted period, in which the existence and amount of the company’s debts can be investigated and established so that funds can be injected to pay them off in a piecemeal fashion. That is inherently unlikely to be capable of being established within the five day period provided, so the effect of allowing an extension of time to do so would not be to allow the purpose of the jurisdiction to be served, but to change that purpose into something wholly different.

Indeed if this application were allowed it would in effect create a jurisdiction for a winding up to be set aside in any case in which the debts proved (and the costs of liquidation) were in fact discharged however long it took to do so. Such a jurisdiction is explicitly provided for in bankruptcy, as one of the grounds for annulment, but not in winding up, and that is no doubt a deliberate policy choice by the legislature.

It follows that there is no good reason for the failure to comply with the time limit required. The non compliance was caused not because the applicant was inadvertently prevented from complying with the rule but because he was seeking to do something that the rule was not intended to allow.

Even if such a purpose was within the contemplation of the rule, it is a further indication that there is no good reason for failing to comply with the time limit that this is a second application- the shareholders had one opportunity to show the court that all debts had been paid, if that was to be relied on, but they failed or were unable to do so before the first application was heard.

Secondly, this is not a case in which the company is solvent and seeking to continue its trade. It was not trading at the date it was wound up and is not presently intending to resume trading, but to realise its assets (in the form of the cause of action) for the benefit of its members. It is not solvent, contrary to the assertions made by the applicant, because it has no funds of its own but only what is transferred or returned to it by its shareholder to meet its liabilities. It is not shown by the evidence that these funds belong to the company; indeed it must be assumed that the shareholders’ case is that funds were properly paid out to Mr Wilson and so are his property and are being returned by him as a voluntary act.

The circumstances are very different, in my judgment, from those in Diamond Hangar, which were held to be exceptional. In that case the company was actively trading and intended to continue to do so. There was a history of very substantial financial support for such trading by the principal shareholder, coupled with an undertaking to maintain that support in the future, subordinate the shareholder’s claims to those of other creditors and to make changes to management that were accepted as appropriate to avoid likelihood of similar cash shortages in the future.

It would be undesirable, in my judgment, to allow the present exceptional jurisdiction to be extended as it would be if an application such as this were allowed. Since creditors can only be paid from funds volunteered by the shareholders, it would be likely to lead to a situation in which the shareholders negotiate directly with the creditors on an individual basis, with the substantial advantage that each creditor can be told he is likely to realise nothing in the liquidation if he does not accept what the shareholder offers.

It may be said that that is in effect what may happen in an application to annul a bankruptcy, where the debtor may rely on third party funding, but it is the legislative policy to allow that, no doubt because of the particular consequences to an individual from his personal bankruptcy. The same does not apply to shareholders who insulate themselves from debts by trading through a limited company which they fail to fund sufficiently to pay debts when due.

Thirdly, this is not a case that can in my judgment properly be viewed as exceptional. In this context, the exceptionality referred to relates to the circumstances in which a company came to be wound up when, in the light of the facts as known to the court at the date of the hearing, that can be seen to be inappropriate. In this case, the circumstances were not exceptional at all- the directors and shareholders simply failed to provide funds to the company to deal with a claim by a creditor in good time to avoid the order being made, and now seek a second (or third) chance to do so. The exceptionality suggested is that it is not usual for shareholders to offer to discharge a company’s debts after winding up, but that seems to me to be no more than saying that it is unusual for the rescission application itself to be made.

Finally, there has not in my judgment been any good reason put forward why the order needs to be made. There is no business to preserve for the company, only a question of realisation of its asset. The shareholders say they may choose to pursue projects through the company in future but have advanced no reason why they would not be equally able to use some other vehicle. If the shareholders wish to pursue the cause of action, on the face of it that could be achieved by having it assigned to them, either by way of sale by the liquidator or, now that the winding up is concluded, by way of distribution to the members. Mr Ross was unable to suggest any reason why that could not be done, and when I asked why the application had been brought, could say only, on instructions, that the liquidator had requested that it should be made before he would consider an assignment.

What Next? Expert Advice Is Just A Click Away

If you have any questions, queries or concerns in relation to How To Rescind A Winding Up Order, then Contact Us as soon as possible for advice. Our expertise is at your fingertips.

Disclaimer

This post: How To Rescind A Winding Up Order is not legal advice and should not be relied upon as such. This post How To Rescind A Winding Up Order is provided for information purposes only. You can Contact Us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

[/vc_column_text][/vc_column][/vc_row]

The Court identified the legal issues saying that the Directors had sought to address:

the principles identified by Barling J in Credit Lucky v National Crime Agency [2014] EWHC 83 (Ch), where he said this:

“31. The principles governing the Court’s exercise of its discretion to rescind a winding up order are conveniently listed in the judgment of Mr Philip Marshall QC, sitting as a Deputy High Court Judge, in Metrocab Limited [2010] EWHC 1317 at paragraph 36, in which reference is also made to a number of other relevant authorities, including Re Dollar Land (Feltham) Ltd. (1995) BCC 740, at 748D; Re Piccadilly Property Management Ltd. [1999] 2 BCLC 145; Wilson v. Specter Partnership [2007] BPIR 649, at 658); and Papanicola v. Humphreys [2005] 2 All ER 418, at 424). The principles are as follows (paraphrasing paragraph 36 to some extent):

(1) The power to rescind is discretionary and is only to be exercised with caution;

(2) the onus is on the applicant to satisfy the court that it is an appropriate case in which to exercise the discretion;

(3) it will only be an appropriate case where the circumstances are exceptional and those circumstances must involve a material difference from those before the court that made the original order;

(4) there is no limit to the factors that the court can take into account, and they may include changes since the original order was made, and significant facts which, although in existence at the time of the original order, were not brought to the court’s attention at that time; but where that evidence could have been made available, any explanation the applicant gives for the failure to produce it then or any lack of such an explanation, are factors to be taken into account;

(5) the circumstances in which the court’s power will be exercised will vary but generally where the rescission application involves dismissal of the winding up petition, so that the company is free to resume trading, the court will wish to be satisfied:

(a) that the debt of the petitioning creditor has been paid, or will be paid, that the costs of the Official Receiver or any liquidator can be paid, and that the company is solvent at least on the basis that it can pay its debts as they fall due;

(b) that the application has not been presented in a misleading way and the court is in possession of all the material facts and has not been left in doubt;

(c) that the trading operations of the company have been fair and above board, and there is nothing that requires investigation of the affairs of the company.”

Why The Rescission Was Refused?

The reason the rescission application was refused was because of timescale, trading was not to be resumed, nothing deemed exceptional in the case and no reason for the order to rescind the Winding Up Petition to be made:

The first point to make is that the extension of time required if the application is to proceed, over two years from a specified limit of five days, is extreme. Mr Ross accepts that there is no reported case in which an extension of anything like that amount has been granted. The fact that the Rules impose such a short limit is itself unusual, and emphasises that the jurisdiction is intended to be limited to cases in which it can be very quickly shown that the order for winding up was clearly inappropriate.

Such cases may no doubt include circumstances in which it can be clearly and swiftly shown that, contrary to the finding that formed the basis of the winding up order, the company is able to pay its debts, at least as they fall due, and to show that it is appropriate to permit it to continue to trade. In principle that might be done by injecting a sufficient amount of funds to enable it to be shown that, whatever the exact amount of liabilities, the company would be able to meet them- that is in effect what happened in Diamond Hangar. But they do not, in my judgment, extend to allowing a period, still less a protracted period, in which the existence and amount of the company’s debts can be investigated and established so that funds can be injected to pay them off in a piecemeal fashion. That is inherently unlikely to be capable of being established within the five day period provided, so the effect of allowing an extension of time to do so would not be to allow the purpose of the jurisdiction to be served, but to change that purpose into something wholly different.

Indeed if this application were allowed it would in effect create a jurisdiction for a winding up to be set aside in any case in which the debts proved (and the costs of liquidation) were in fact discharged however long it took to do so. Such a jurisdiction is explicitly provided for in bankruptcy, as one of the grounds for annulment, but not in winding up, and that is no doubt a deliberate policy choice by the legislature.

It follows that there is no good reason for the failure to comply with the time limit required. The non compliance was caused not because the applicant was inadvertently prevented from complying with the rule but because he was seeking to do something that the rule was not intended to allow.

Even if such a purpose was within the contemplation of the rule, it is a further indication that there is no good reason for failing to comply with the time limit that this is a second application- the shareholders had one opportunity to show the court that all debts had been paid, if that was to be relied on, but they failed or were unable to do so before the first application was heard.

Secondly, this is not a case in which the company is solvent and seeking to continue its trade. It was not trading at the date it was wound up and is not presently intending to resume trading, but to realise its assets (in the form of the cause of action) for the benefit of its members. It is not solvent, contrary to the assertions made by the applicant, because it has no funds of its own but only what is transferred or returned to it by its shareholder to meet its liabilities. It is not shown by the evidence that these funds belong to the company; indeed it must be assumed that the shareholders’ case is that funds were properly paid out to Mr Wilson and so are his property and are being returned by him as a voluntary act.

The circumstances are very different, in my judgment, from those in Diamond Hangar, which were held to be exceptional. In that case the company was actively trading and intended to continue to do so. There was a history of very substantial financial support for such trading by the principal shareholder, coupled with an undertaking to maintain that support in the future, subordinate the shareholder’s claims to those of other creditors and to make changes to management that were accepted as appropriate to avoid likelihood of similar cash shortages in the future.

It would be undesirable, in my judgment, to allow the present exceptional jurisdiction to be extended as it would be if an application such as this were allowed. Since creditors can only be paid from funds volunteered by the shareholders, it would be likely to lead to a situation in which the shareholders negotiate directly with the creditors on an individual basis, with the substantial advantage that each creditor can be told he is likely to realise nothing in the liquidation if he does not accept what the shareholder offers.

It may be said that that is in effect what may happen in an application to annul a bankruptcy, where the debtor may rely on third party funding, but it is the legislative policy to allow that, no doubt because of the particular consequences to an individual from his personal bankruptcy. The same does not apply to shareholders who insulate themselves from debts by trading through a limited company which they fail to fund sufficiently to pay debts when due.

Thirdly, this is not a case that can in my judgment properly be viewed as exceptional. In this context, the exceptionality referred to relates to the circumstances in which a company came to be wound up when, in the light of the facts as known to the court at the date of the hearing, that can be seen to be inappropriate. In this case, the circumstances were not exceptional at all- the directors and shareholders simply failed to provide funds to the company to deal with a claim by a creditor in good time to avoid the order being made, and now seek a second (or third) chance to do so. The exceptionality suggested is that it is not usual for shareholders to offer to discharge a company’s debts after winding up, but that seems to me to be no more than saying that it is unusual for the rescission application itself to be made.

Finally, there has not in my judgment been any good reason put forward why the order needs to be made. There is no business to preserve for the company, only a question of realisation of its asset. The shareholders say they may choose to pursue projects through the company in future but have advanced no reason why they would not be equally able to use some other vehicle. If the shareholders wish to pursue the cause of action, on the face of it that could be achieved by having it assigned to them, either by way of sale by the liquidator or, now that the winding up is concluded, by way of distribution to the members. Mr Ross was unable to suggest any reason why that could not be done, and when I asked why the application had been brought, could say only, on instructions, that the liquidator had requested that it should be made before he would consider an assignment.

What Next? Expert Advice Is Just A Click Away

If you have any questions, queries or concerns in relation to How To Rescind A Winding Up Order, then Contact Us as soon as possible for advice. Our expertise is at your fingertips.

Disclaimer

This post: How To Rescind A Winding Up Order is not legal advice and should not be relied upon as such. This post How To Rescind A Winding Up Order is provided for information purposes only. You can Contact Us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

[/vc_column_text][/vc_column][/vc_row]

Interestingly, the Directors paid all the costs, expenses and debts of the company in Liquidation and as a result the Liquidator had no objection to the application to rescind the Winding Up Petition.

Legal Principles: How To Rescind A Winding Up Order

The Court identified the legal issues saying that the Directors had sought to address:

the principles identified by Barling J in Credit Lucky v National Crime Agency [2014] EWHC 83 (Ch), where he said this:

“31. The principles governing the Court’s exercise of its discretion to rescind a winding up order are conveniently listed in the judgment of Mr Philip Marshall QC, sitting as a Deputy High Court Judge, in Metrocab Limited [2010] EWHC 1317 at paragraph 36, in which reference is also made to a number of other relevant authorities, including Re Dollar Land (Feltham) Ltd. (1995) BCC 740, at 748D; Re Piccadilly Property Management Ltd. [1999] 2 BCLC 145; Wilson v. Specter Partnership [2007] BPIR 649, at 658); and Papanicola v. Humphreys [2005] 2 All ER 418, at 424). The principles are as follows (paraphrasing paragraph 36 to some extent):

(1) The power to rescind is discretionary and is only to be exercised with caution;

(2) the onus is on the applicant to satisfy the court that it is an appropriate case in which to exercise the discretion;

(3) it will only be an appropriate case where the circumstances are exceptional and those circumstances must involve a material difference from those before the court that made the original order;

(4) there is no limit to the factors that the court can take into account, and they may include changes since the original order was made, and significant facts which, although in existence at the time of the original order, were not brought to the court’s attention at that time; but where that evidence could have been made available, any explanation the applicant gives for the failure to produce it then or any lack of such an explanation, are factors to be taken into account;

(5) the circumstances in which the court’s power will be exercised will vary but generally where the rescission application involves dismissal of the winding up petition, so that the company is free to resume trading, the court will wish to be satisfied:

(a) that the debt of the petitioning creditor has been paid, or will be paid, that the costs of the Official Receiver or any liquidator can be paid, and that the company is solvent at least on the basis that it can pay its debts as they fall due;

(b) that the application has not been presented in a misleading way and the court is in possession of all the material facts and has not been left in doubt;

(c) that the trading operations of the company have been fair and above board, and there is nothing that requires investigation of the affairs of the company.”

Why The Rescission Was Refused?

The reason the rescission application was refused was because of timescale, trading was not to be resumed, nothing deemed exceptional in the case and no reason for the order to rescind the Winding Up Petition to be made:

The first point to make is that the extension of time required if the application is to proceed, over two years from a specified limit of five days, is extreme. Mr Ross accepts that there is no reported case in which an extension of anything like that amount has been granted. The fact that the Rules impose such a short limit is itself unusual, and emphasises that the jurisdiction is intended to be limited to cases in which it can be very quickly shown that the order for winding up was clearly inappropriate.

Such cases may no doubt include circumstances in which it can be clearly and swiftly shown that, contrary to the finding that formed the basis of the winding up order, the company is able to pay its debts, at least as they fall due, and to show that it is appropriate to permit it to continue to trade. In principle that might be done by injecting a sufficient amount of funds to enable it to be shown that, whatever the exact amount of liabilities, the company would be able to meet them- that is in effect what happened in Diamond Hangar. But they do not, in my judgment, extend to allowing a period, still less a protracted period, in which the existence and amount of the company’s debts can be investigated and established so that funds can be injected to pay them off in a piecemeal fashion. That is inherently unlikely to be capable of being established within the five day period provided, so the effect of allowing an extension of time to do so would not be to allow the purpose of the jurisdiction to be served, but to change that purpose into something wholly different.

Indeed if this application were allowed it would in effect create a jurisdiction for a winding up to be set aside in any case in which the debts proved (and the costs of liquidation) were in fact discharged however long it took to do so. Such a jurisdiction is explicitly provided for in bankruptcy, as one of the grounds for annulment, but not in winding up, and that is no doubt a deliberate policy choice by the legislature.

It follows that there is no good reason for the failure to comply with the time limit required. The non compliance was caused not because the applicant was inadvertently prevented from complying with the rule but because he was seeking to do something that the rule was not intended to allow.

Even if such a purpose was within the contemplation of the rule, it is a further indication that there is no good reason for failing to comply with the time limit that this is a second application- the shareholders had one opportunity to show the court that all debts had been paid, if that was to be relied on, but they failed or were unable to do so before the first application was heard.

Secondly, this is not a case in which the company is solvent and seeking to continue its trade. It was not trading at the date it was wound up and is not presently intending to resume trading, but to realise its assets (in the form of the cause of action) for the benefit of its members. It is not solvent, contrary to the assertions made by the applicant, because it has no funds of its own but only what is transferred or returned to it by its shareholder to meet its liabilities. It is not shown by the evidence that these funds belong to the company; indeed it must be assumed that the shareholders’ case is that funds were properly paid out to Mr Wilson and so are his property and are being returned by him as a voluntary act.

The circumstances are very different, in my judgment, from those in Diamond Hangar, which were held to be exceptional. In that case the company was actively trading and intended to continue to do so. There was a history of very substantial financial support for such trading by the principal shareholder, coupled with an undertaking to maintain that support in the future, subordinate the shareholder’s claims to those of other creditors and to make changes to management that were accepted as appropriate to avoid likelihood of similar cash shortages in the future.

It would be undesirable, in my judgment, to allow the present exceptional jurisdiction to be extended as it would be if an application such as this were allowed. Since creditors can only be paid from funds volunteered by the shareholders, it would be likely to lead to a situation in which the shareholders negotiate directly with the creditors on an individual basis, with the substantial advantage that each creditor can be told he is likely to realise nothing in the liquidation if he does not accept what the shareholder offers.

It may be said that that is in effect what may happen in an application to annul a bankruptcy, where the debtor may rely on third party funding, but it is the legislative policy to allow that, no doubt because of the particular consequences to an individual from his personal bankruptcy. The same does not apply to shareholders who insulate themselves from debts by trading through a limited company which they fail to fund sufficiently to pay debts when due.

Thirdly, this is not a case that can in my judgment properly be viewed as exceptional. In this context, the exceptionality referred to relates to the circumstances in which a company came to be wound up when, in the light of the facts as known to the court at the date of the hearing, that can be seen to be inappropriate. In this case, the circumstances were not exceptional at all- the directors and shareholders simply failed to provide funds to the company to deal with a claim by a creditor in good time to avoid the order being made, and now seek a second (or third) chance to do so. The exceptionality suggested is that it is not usual for shareholders to offer to discharge a company’s debts after winding up, but that seems to me to be no more than saying that it is unusual for the rescission application itself to be made.

Finally, there has not in my judgment been any good reason put forward why the order needs to be made. There is no business to preserve for the company, only a question of realisation of its asset. The shareholders say they may choose to pursue projects through the company in future but have advanced no reason why they would not be equally able to use some other vehicle. If the shareholders wish to pursue the cause of action, on the face of it that could be achieved by having it assigned to them, either by way of sale by the liquidator or, now that the winding up is concluded, by way of distribution to the members. Mr Ross was unable to suggest any reason why that could not be done, and when I asked why the application had been brought, could say only, on instructions, that the liquidator had requested that it should be made before he would consider an assignment.

What Next? Expert Advice Is Just A Click Away

If you have any questions, queries or concerns in relation to How To Rescind A Winding Up Order, then Contact Us as soon as possible for advice. Our expertise is at your fingertips.

Disclaimer

This post: How To Rescind A Winding Up Order is not legal advice and should not be relied upon as such. This post How To Rescind A Winding Up Order is provided for information purposes only. You can Contact Us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

[/vc_column_text][/vc_column][/vc_row]