Members’ wishes to be ascertained before restoration

Published on
2 min read

The members of three companies voted to place each company into a Members’ Voluntary Liquidation, and to appoint liquidators, in 2015. Notwithstanding the concerns raised by minority shareholders about the management of the companies, final meetings were held, the liquidators released and the companies were dissolved in 2016.

In 2018, minority shareholders successfully applied, without notice, for the companies to be restored and new liquidators to be appointed. The appellant and a former liquidator unsuccessfully applied for the restoration order to be set-aside. That decision was appealed.

Allowing the appeal, and remitting the set-aside and restoration application to the Chief ICC Judge for directions, the Court of Appeal held that:

  1. The appellant (and the former liquidator) had standing to appear on the restoration application.
  2. Given that it was a decision for the members to place a company into MVL, and to appoint liquidators, the Court had to consider whether (and how members) should be consulted. In this instance, members’ wishes should have been ascertained before the final decision regarding restoration is made.
  3. The Court directed meetings of the members of each company take place to consider whether the companies should remain restored so as to allow the liquidators to investigate the management of the Companies and, if so, how those investigations should be funded.

Take home points:

  1. Where a company has been in a MVL, the courts will have regard to the shareholders’ views.
  2. A minority shareholder has the right to issue restoration proceedings, but will not be allowed to disrupt the rights of the member group as a whole. If bringing such an application, the applicant should seek to consult the other members to obtain their consent.
  3. Liquidators should consider approval before undertaking investigations, as the cost may impact on the return to members.

Walid Khalil Fakhry v (1) Laurence Pagden (2) Simon James Underwood [2020] EWCA Civ 1207

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