In most circumstances, winding up a solvent company is considered a drastic and exceptional measure — a true remedy of last resort. Yet, as the High Court reaffirmed in Dosanjh v Balendran [2025] EWHC 507 (Ch), where relationships between shareholders irretrievably break down and the business can no longer function, the courts will not hesitate to intervene.
What Is a Just and Equitable Winding Up?
Under section 122(1)(g) of the Insolvency Act 1986, the court may wind up a company if it is “just and equitable” to do so. This is a flexible and discretionary remedy, often deployed in shareholder disputes where:
- The company is in functional deadlock,
- The parties operate in a quasi-partnership with mutual trust and confidence,
- There has been serious misconduct or loss of trust between members.
The applicant must typically show that the company is solvent and that some tangible benefit (such as a return to shareholders) would arise from a winding up.
Background: Dosanjh v Balendran
Webb Estate Developments Ltd was a property company co-owned and managed by Peter Dosanjh and Victor Balendran. Though the company held property assets worth over £6.8 million, the business relationship between the two directors deteriorated from 2020 onwards. Disputes arose over the management of the company, including how monthly payments of £7,000 to each director should be treated.
Mr Dosanjh petitioned to wind up the company, arguing there was a total breakdown in trust and that the business was effectively paralysed. He declined to buy out Mr Balendran’s shareholding and insisted that there was no workable way forward.
The Court’s Reasoning
The court found in favour of Mr Dosanjh and granted a compulsory winding up order. Key findings included:
- Irretrievable Breakdown: There had been a complete loss of trust and confidence between the directors. The company was in deadlock and unable to function, with disputes even over basic issues such as director payments.
- No Clean Hands Objection: Mr Balendran’s argument that Mr Dosanjh came to court with “unclean hands” was dismissed. The court did not view the petition as an abuse of process or as a pressure tactic.
- Disputed Payments: The court firmly rejected the suggestion that the £7,000 monthly payments were reimbursement of expenses. The judge noted there was no evidence of corresponding expenditure and that the payments more likely represented director remuneration or loan repayments — both of which had not been properly documented or approved.
- No Alternative Remedy: Given the deadlock and unwillingness to cooperate, the court concluded that there was no realistic alternative to winding up. Attempts to continue the business were not viable, and neither party was willing or able to buy the other out.
Mr Dosanjh’s candid statement — “Please STOP the monthly payments. We are breaking the law” — illustrated the dysfunctional state of affairs.
Final Order
In granting the winding up order, the court confirmed:
“The breakdown in the relationship and the deadlock is such that it is entirely unsurprising that Mr Dosanjh resorted to petitioning for the winding up of the Company.”
The judge made a standard compulsory order and invited the parties to agree costs and consequential matters. If agreement could not be reached, the court would list a further hearing.
Conclusion
This case is a clear reminder that when shareholder relationships deteriorate to the point where a company is paralysed, the courts will not hesitate to intervene — even where the business is solvent and has significant assets.
However, a petitioner must come to court with clean hands and demonstrate that winding up is genuinely the last resort. Careful legal advice is essential at an early stage in any shareholder dispute to avoid escalating matters or prejudicing the chances of a fair outcome.
Get in touch
For guidance on resolving shareholder disputes or applying to wind up a company, please contact Sam Pedley by emailing samuel.pedley@mfgsolicitors.com or calling our Commercial Litigation team on 01562 820181.
It’s just and fair.
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