For many business owners, the idea of “winding up” a company feels like failure. But in some cases, the law recognises something more nuanced: that continuing a company may itself be impossible.
That is where the “just and equitable” winding up jurisdiction comes in, a powerful, but often misunderstood, remedy under UK insolvency law.
Under section 122(1)(g) of the Insolvency Act 1986, the court may wind up a company if it considers it “just and equitable” to do so.
This is not a mechanical test but a discretionary one. The court looks at fairness in the round, weighing all circumstances up before taking what is often described as a remedy of last resort.
Although each case turns on its facts, the courts have consistently identified key scenarios where winding up may be justified:
- Deadlock at board or shareholder level
- Breakdown of trust in quasi-partnership companies (generally owner-managed businesses built on personal relationships)
- Exclusion from management where there was a legitimate expectation to participate
- Loss of the company’s purpose or impossibility of continuing its original business
- Lack of probity or misconduct management
The court will not wind up a viable company lightly. Even where relationships have broken down, the court will often refuse a petition if there is a realistic alternative, such as:
- A share buy-out
- An unfair prejudice petition under s.994 Companies Act 2006
- Negotiated exit arrangements
The court may reject a petition where pursuing liquidation would be disproportionate or commercially destructive, particularly if the business is still trading successfully.
Who can bring a petition?
A range of parties may petition for the just and equitable winding up of a company, including:
- Shareholders (most commonly minority shareholders)
- Directors
- Creditors
- Contributories
However, shareholders must usually demonstrate a tangible interest, for example, a prospect of surplus assets on winding up.
A just and equitable winding up petition is not actually about insolvency, it is about fairness in corporate relationships.
But fairness cuts both ways.
If a viable business can be saved, restructured, or separated, the court will usually expect that route to be taken. Liquidation is the nuclear option, and one the courts deploy sparingly.
In owner-managed businesses especially, the line between commercial disagreement and equitable breakdown can be thin. Recognising where you are on that spectrum and acting early can be the difference between resolution and dissolution.
Summary
- Breakdown in relationships will not, by itself, be enough
- Courts expect commercially sensible behaviour
- Conduct during disputes can influence the outcome, as Tees’, Ana James-Pittau witnessed in the latest just and equitable petition she presented on behalf of her client. Whereby the Respondent’s conduct throughout the proceedings, which was described as irrational in the Judgement, such that it supported the fact that a just and equitable winding up of the Company was the only viable remedy.
