3.2.3 Procedure

In order to present a petition under on the basis of S. 122 (1) (g) IA 1986, a shareholder has to demonstrate that the shares, or a part of the shares, in respect of which he is a contributory, were originally allotted to him. A shareholder can also qualify to start proceedings if he demonstrates that the shares have been held by him, and are registered in his name, for at least six months during the eighteen months before the presentation of the petition for winding-up, or have devolved on him through the death of a former holder.1

Moreover, a shareholder must show a tangible interest in the winding-up in order to ground a petition for a just and equitable winding-up. A tangible or sufficient interest is present when it is foreseen that there will be a significant surplus after payment of the companies' creditors or when it is established that the shareholder will achieve some advantage, or avoid or minimize some disadvantage by winding-up of the company.2 The court will strike out the petition if no tangible interest is demonstrated by the petitioner, notably when it turns out that the shares are valueless or almost valueless. Hollington explains this rule as follows:

Nonetheless, if the company withholds accounts or financial information, so that a shareholder will not be able to prove a significant surplus, the court may allow the petition under s. 122 (1) (g) IA 1986 to be brought before the court.4

Paradoxically, if the company is unable to meet its debts, individual members just like creditors — may petition for the winding-up of the company on the basis of S. 122 (1) (f) IA 1986. It is clear that in this situation no monetary surplus will be available for the shareholders. However, as practice turns out, the laffer section is used mostly by creditors.5

A petition for a winding-up of a company registered in England or Wales can always be brought before the High Court. If the paid-up capital of the company does not exceed £120,000, there is concurrent jurisdiction of the County Court of the district in which the company's registered office is situated.6 In case the proceedings start at a County Court, it is possible to submit questions to the High Court.7

Appeal to a decision of a County Court can be made to a Judge of the High Court. To a decision of a Judge of the High Court, made on first instance, appeal can be made to the Court of Appeal. An appeal from decision of a Judge of the High Court, which is not a decision on first appeal, lies with the Court of Appeal.8

In several instances, it is required to ask for permission to bring a case to court. When a first appeal is made, no permission to appeal of any court is needed. In case an appeal is sought against a decision, which is not a decision on first appeal, permission is required. In order to appeal against a decision of a Judge of the High Court, which lies with the Court of Appeal, permission is required from the Court of Appeal. The judge of an appeal court will only grant permission for the appeal if this case would raise an important point of principle or practice or if there is another compelling reason for the Court of Appeal to allow the appeal.9

A party also has the option to appeal to the House of Lords. Permission can be given by a lower court. The granting of permission by a lower court to appeal to the House of Lords is rare. It is even rarer when permission for appeal to the House of Lords is given by a first instance court, which is called leapfrogging.10 When a lower court refuses permission, permission can be given by the Appeal Committee of the House of Lords and is required in order to appeal.11 This is the usual way in which cases are brought before the House of Lords. Leave to appeal will only be granted when the Appeal Committee is of the opinion that the case involves an arguable point of law of general public importance.12

Once a petition for a just and equitable winding-up is admitted at the court, s. 127 IA 1986 applies. This section demands that any disposition of thecompany's property, any transfer of shares, or alteration in the status of the company's members made after the commencement of the winding-up is void, unless the court orders otherwise. S. 129 (2) IA 1986 provides that the winding-up of the company is deemed to commence at the time of the presentation of the petition for winding-up. The result of the application of this rule is that the company is temporarily paralyzed because it cannot carry out further business activities.

The paralysie of the company may cause difficulties. To overcome these difficulties, Practice Direction 49B has been introduced.13 This Practice Direction determines that the petitioner has to choose whether it consents to or objects to a standard order for dispensation. This standard order will grant the company dispensation for s. 127 IA 1987 for payments into or out of bank accounts, which are made in the daily course of business, and for disposition of property for a proper value in the daily course of business. If the petitioner consents, the order will be given without further enquiry. The petitioner can also object to the order. His objection must be supported by written evidence that includes a statement of the reasons of the objection.14 In the majority of cases, a standard dispensation order is applied.15

The possible application of S. 127 IA 1986 puts more pressure on a winding-up case, although in practice the court can limit its harsh consequences. The unfür prejudice remedy (see § 3.3) lacks this option. The option to paralyze the company is the reason why a petition onder the (by far more popular) unfür prejudice remedy is often joined by a petition on the basis of the winding-up remedy. Practice Direction 49B intends to discourage this practice. Practice Direction 49B draws the attention of the courts to the undesirability of a petition for a winding-up in the alternative of the unfür prejudice remedy. Section (1) of the practice direction declares that a petition should not request for a winding-up order, unless that is the preferred order, or else, that it is thought that the order is the only relief to which the petitioner is entitled.16Nonetheless, despite the undesirability of a combination of the two remedies, it is not prohibited to combine them.

If the court rules that it is just and equitable to wind up the company, the company will be liquidated. The winding-up order is based on the same section as is the order to wind up the company when it is unable to pay its debts, notably s. 122 (1) (g) IA 1986. When the court orders the company to be winded up, the official receiver attached to the court becomes the liquidator of the company, as follows from s. 136 (2) IA 1986. The court can also choose to appoint another liquidator. The tasks of the liquidator are, according to s. 143 (1) IA 1986, to secure that the assets of the company are got in, realized and distributed to the company's creditors and, in case of a surplus, to distribute it to the persons entitled to it.