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CYPRUS: English Guidance on the grounds of winding up of companies on the just and equitable basis

 

Based on English case law, winding up orders have been made in, among other instances, the following circumstances, where:

 

1. There has been a loss, or failure of substratum, or objects of the company (i.e. the purpose or object for which the company was been established, has been abandoned, or come to an end, or had become impossible to be implemented (see RE SUBURBAN HOTEL (1867) 2 CH APP. 737, RE GERMAN DATE COFFEE LTD (1882) 20 CH. D. 169, RE HAVEN GOLD MINING CO (1882) 20 CH D. 151).

 

2. The company’s object has been achieved (see RE ABBEY LEISURE LTD (1990) BCLC 343)

 

3. The company was more of a “bubble” company or a “sham” or a “trap” (i.e. when the company was established to defraud its shareholders and not to work etc.).

 

4. The company was established to carry out illegal business (see RE INTERNATIONAL SECURITIES CORP. (1908) 99 LT 581)

 

5. The company’s only business was ultra vires the company (see RE CROWN BANK (1890) 44 CH. D. 634).

 

6. There is a deadlock between shareholders and company cannot operate (see RE YENIDJE TOBACCO CO LTD [1916] 2 CH. 426.

 

7. There had been a breach of the agreement contained in the Articles of Association of the company or any Shareholders Agreement (see RE A & BC CHEWING GUM LTD [1975] 1 WLR 579).

 

8. There had been justifiable loss of confidence in management of the company (i.e. due to fraud, serious misconduct, or serious mismanagement by majority shareholders and its director (see LOCH -V- JOHN BLACKWOOD LTD [1924] AC 783; RE BRINSMEAD & SONS [1897] 1 CH. 406.

 

9. The company constitutes a “quasi partnership” and there is exclusion from management of minority shareholder, loss of confidence, breach of trust etc., (see RE EBRAHIMI -V- WESTBOURNE GALLERIES LTD (1973) AC 360; THOMSON -V- DRYSDALE (1925) S.C. 311; RE A & BC CHEWING GUM LTD (SUPRA)).

 

10. There had been failure to pay reasonable dividends in circumstances where the company could afford to pay reasonable dividends and the directors of the company were paying themselves excessive remuneration (see RE A COMPANY (NO. 00370 of 1987); EX PARTE GLOSSOP (1988) 1 WLR 1068.

 

 

 

 

For further information on this topic please contact

Mr. Soteris Pittas( spittas@pittaslegal.com ) at SOTERIS PITTAS & CO LLC,

by telephone (+357 25 028460) or by fax (+357 25 028461)

 

 

The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.