Revisiting just and equitable winding up

The judgment makes interesting reading and relevant to any shareholder dispute as it explores when a just and equitable winding up order may be made which are:

• To resolve a functional deadlock which led to an inability for the company to function at board or shareholder level.
• The company was a quasi-partnership and there was an irretrievable breakdown in trust and confidence.

In this case, although Mr Lau could, in theory, untangle himself from the deadlock by selling his shares, a third party was never likely to pay full value for them and so did not bar him from petitioning for a winding up.

The Court also rejected the argument (accepted by the Court of Appeal) that if deadlock is proved, a buy-out was the appropriate remedy. Whilst it was correct a petition could be resisted if the applicant had unreasonably failed to pursue another remedy, the respondent had to put forward what alternative remedy there was. This was a “paradigm case” of a breakdown in trust and confidence and of functional deadlock and in such cases a winding up was typically appropriate remedy.

Chu v Lau (British Virgin Islands) [2020] UKPC 24