The High Court has held that it was just and equitable for a public company registered in England and Wales and listed on a French stock exchange to be wound up by the court. (Duneau v Klimt Invest SA and others [2022] EWHC 596 (Ch)).

The Facts

Klimvest Plc was the last in a number of IT companies which had been owned by Michel Balcaen and Eric Duneau. Klimvest was incorporated in April 2002 and had been converted to a public limited company in July 2006. In October 2006 Klimvst was listed on the Alternext exchange in Paris. At the time of the winding up petition, Mr Balcaen was the chairman of Klimvest and the majority shareholder via Klimt Invest SA whilst Mr Duneau was a director and minority shareholder. The company had developed its IT business and had purchased a number of IT companies. In January 2019 Klimvest's business and assets were purchased by P1C for £8.25 million. The shareholders had not been able to agree what to do with the cash held by Klimvest. Mr Balcaen and his supporters wanted to use it to invest in various businesses. However, Mr Duneau and his supporters wanted the cash to be distributed and Klimvest wound up. Mr Duneau presented the winding up petition on 14 October 2020. Klimt Invest opposed the petition and asserted that the purpose or substratum of the company had not come to an end and the company was now a holding company. At the subsequent AGM in May 2021, Mr Duneau was removed as a director.

Just and equitable winding up

The Court considered the remedy of a just and equitable winding up. It noted that the starting point is section 121(1)(g) of the Insolvency Act 1986 which provides that a company may be wound up by the court if "it is just and equitable that the company should be wound up" and

Section 125 Insolvency Act which makes it clear that if another remedy is available and the petitioner is acting unreasonably in not pursuing that other remedy, then the court does not have to make an order to wind up a company on just and equitable grounds. Where there is a dispute between shareholders, then a petition under section 994 Companies Act 2006 on the grounds of unfair prejudice may be more appropriate.

The judge noted that in Lau v Chu [2020] UKPC 24, the Privy Council held that the legal burden of proof was on the applicant to establish his or her entitlement to relief. If the applicant established his entitlement to relief, then a winding up would be just and equitable if there were no other remedies available. If this is established, the legal burden of proof shifts to the respondent to prove that the petitioner has unreasonably failed to pursue some other available remedy rather than seeking a winding up order. The judge noted that where there is no alternative remedy available, the question to be answered is whether it is just and equitable for the company to be wound up. The judge also noted that the Privy Council had noted that "just and equitable" was a general term and that it was impossible to define the circumstances where just and equitable considerations would arise.

The judge noted that recognised grounds for seeking a winding up on the just and equitable ground included:

  • quasi-partnership,
  • where a petitioner was removed as a director in breach of an implied agreement or understanding that he was to have a seat on the board,
  • where the respondents had entered into an agreement or understanding with the petitioners that the company will be wound up.

It was standard practice where the court was considering whether to grant discretionary relief of an equitable nature for the court to consider all relevant matters as at the date of the hearing. Apart from the question of alternative remedies, discretionary matters could include considerations such as the wishes of other members of the company, the financial consequences to the company of making a winding up order, and the conduct of the petitioner.

Loss of substratum

The judge found that following the sale of the business and assets of Klimvest, it had become impossible for the company to pursue its purpose. The starting point for ascertaining whether there had been a loss of substratum or purpose was Klimvest's memorandum and articles of association. The court can look beyond the terms of the memorandum of association in order to ascertain the main object of the company including material which was available to all those who have invested in the company including the offer circular in the case of a public company.

The judge felt that the question as to why the loss of substratum ought to provide a basis for a shareholder to seek to wind up a company is fundamentally a question of equity between the company and its shareholders. The court held that it may be just and equitable to wind up a company if its directors cause it to embark upon acts which are different from what can be regarded as the general intention and common understanding of the shareholders when they became shareholders. This was so even if the company could still pursue its original objects as set out in the memorandum of association. The judge noted that Klimvest had changed from the use of simulation or cloning technology for training people to use IT applications to investing in promising technologies. The judge found that the loss of substratum had been made out, and that it was practically impossible for Klimvest to pursue its main or paramount purpose. The sale of Klimvest's business and assets taken together with the proposal to invest in promising technology companies represented a clear abandonment of the main purpose of the company. The judge also held that Mr Balcaen had promised that the sale proceeds of Klimvest's business and assets would be distributed to the shareholders.

The judge went on to consider the position under section 125(2) Insolvency Act which concerns the powers of the court where a petition for a just and equitable winding up has been presented by a shareholder. He noted that the effect of section 125(2) is that the burden of proof is on the petitioner to establish his entitlement to a just and equitable winding up if no other remedies were available and that where the petitioner has established this, the burden of proof shifts to the respondent to prove that the petitioner has unreasonably failed to pursue some other available remedy rather than seeking to wind up the company.

The judge held that the loss of substratum was sufficient grounds for the court to wind up Klimvest on just and equitable grounds and that Mr Duneau had not acted unreasonably in not pursuing any other remedies which may be available to him as a shareholder.


The judgment is a useful reminder of the factors which a court will take into account when considering a petition to wind up a company on just and equitable grounds. It is important for the petitioner to have considered the contractual rights of shareholders and whether other remedies were available before considering whether it is equitable for the company to be wound up. The option of a just and equitable winding up is one that the courts will be slow to use without appropriate grounds being made out and where the burden of proof has been satisfied.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.