The Petition Heard

In one line

On a petition the Tribunal may dismiss, make an interim order, appoint a provisional liquidator after hearing the company, order winding up, or make any other order, ordinarily within ninety days; it may not refuse merely because the company has no assets; it must refuse a just and equitable petition where another remedy is available and the petitioner is acting unreasonably; and it directs the company to file its objections with a statement of affairs, failing which the company forfeits its right to oppose.

In exam wording: under section 273(2), where a petition is presented on the ground that it is just and equitable that the company should be wound up, the Tribunal may refuse to make an order of winding up if it is of the opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing the other remedy.

Why the law has this at all

Between the presentation of a petition and a winding up order lie the two things that decide most cases: what the Tribunal may do while it decides, and what the company must disclose.

The interval is dangerous. A company facing a winding up petition has every incentive to dispose of assets, prefer favoured creditors and destroy records. Section 273(1)(b) and (c) answer that with interim orders and a provisional liquidator, and s.274(3) requires the books to be handed over once the order is made.

And the Tribunal cannot decide blind. A petitioner outside the company knows little of its affairs; only the company has the figures. Section 274 therefore compels the company, once a prima facie case is shown, to file its objections together with a statement of affairs, and attaches a serious consequence to a failure.

Two further provisions in s.273 do work of a different kind, and both should be named early in an answer.

The third proviso stops an obvious argument: a company with no assets, or whose assets are fully mortgaged, cannot resist winding up on that ground alone. Winding up is not only about distributing property; it also ends the legal person, examines the conduct of those who ran it, and makes the machinery of ss.336 to 342 available.

Sub-section (2) is the counterpart on the other side, and it is the statutory recognition of what [Just and Equitable Winding Up] describes: where a s.241 petition would serve, a member who insists on liquidation is acting unreasonably.

Section 273(1): the five orders

On receipt of a petition under s.272 the Tribunal may pass any of the following orders:

(a) dismiss it, with or without costs;