COMPANY LAW- I

ASSIGNMENT WORK ON “WINDING UP A COMPANY”

CASE STUDY ON RE PEVERIL GOLD MINE LTD

SUBMITTED TO: ASSISTANT PROF. SUBMITTED BY:

Miss. MUKTA JAGIR KASHISH RANA

17RU11011
FACTS:

The articles of association of Peveril Gold Mines Ltd said no member should petition for
winding up unless two directors had consented or the general meeting had resolved or a
petitioner held at least 20% of issued capital. A member asked for winding up without satisfying
any of these conditions.

ISSUE:

1) Whether the member is entitled to file a suit for winding up?

2) Whether satisfaction of conditions aforesaid are mandatory?

RELEVENCY:

Companies Act of 1862,

Insolvency Act of 1986

JUDGMENT:

Lord Lindley MR held that the member was entitled to do so. He said ‘these registered limited
companies are incorporated on certain conditions; they continue to exist on certain conditions;
and they are liable to be dissolved on certain conditions.’ He pointed to the predecessors
of Insolvency Act 1986 sections 122 and sections 124 and said they set out circumstance when a
company can be dissolved by the court and who can petition. A member could not be restricted.

ANALYSIS:

In Lord Macnaghten in Welton v Saffery1: “These companies are the creature of statute, and
by the statute to which they owe their being they must be bound in regard to shareholders as
well as in regard to creditors in all matters coming within the conditions of the memorandum
of association.
Shareholders in these companies require protection just as much as creditors—perhaps even
more;
“ ”
shareholders are not partners for all purposes;
they have not all the rights of partners;
they have practically no voice in the management of the concern.
Their security in a great measure depends on the directors adhering to the requirements of the
Act.” Any one who is familiar with the Companies Acts knows perfectly well that these
registered limited companies are incorporated on certain conditions; they continue to exist on

1
[1897] AC 324
 certain conditions; and they are liable to be dissolved on certain conditions.
The important sections of the Act of 1862, with regard to dissolution, are ss. 79 and 82. Sect.
79 states the circumstances under which such a company may be dissolved by the Court, and
section 82 states the persons who may petition for dissolution.
Any article contrary to these sections—any article which says that the company is formed on
the condition that its life shall not be terminated when any of the circumstances mentioned in
s. 79 exist, or which limits the right of a contributory under s. 82 to petition for a winding-up,
would be an attempt to enforce on all the shareholders that which is at variance with the
statutory conditions, and is invalid. It is no answer to say that the right to petition may be
waived by any contributory personally. I do not intend to decide whether a valid contract may
or may not be made between the company and an individual shareholder that he shall not
petition for the winding up of the company. That point does not arise now. But to say that a
company is formed on the condition that its existence shall not be terminated under the
circumstances or on the application of the persons, mentioned in the Act is to say that it is
formed contrary to the provisions of the Act, and upon conditions which the Court is bound to
ignore. The view taken by Byrne J. was right, and the appeal must be dismissed.

APPLICABILITY:

Section 439 provides that an application to the Court for the winding up of a company can be
made:

(a) By the company;

(b) By any creditor or creditors, including any contingent or prospective Creditor or creditors;

(c) By any contributory or contributories;

(d) by all or any of the parties at (a), (b) and (c), whether together Or separately;

(e) By the Registrar of Companies;

(f) By any person authorized by the Central Government as a result of investigation carried out
on the affairs of a company pursuant to section 237;

(g) By the Central Government or a State Government, in a case falling under clause (h) of
section 433.

Articles of Association: Every company needs a set of rules and regulations to manage its
internal affairs. There are two important business documents of a company, namely,
Memorandum of Association (MOA) and Articles of Association (AOA). The AOA specifies the
internal regulations of the company. In this post, we will look at the Articles of Association
(AOA) in detail.
The AOA contains the bye-laws of the company. Therefore, the director and other members must
perform their functions as regards the management of the company, its accounts, and audits in
accordance with the AOA.

The AOA can contain provisions for entrenchment for specific provisions. The provisions for
entrenchment can ensure that the specified provisions are altered only if certain conditions or
procedures are met or complied with. These conditions are usually more restrictive than those
applicable for a special resolution.

The inclusion of the provisions for entrenchment is possible:

• On the formation of the company

• Also, by amending the Articles with approval from all members of the company. Further,
in the case of a public limited company, with a special resolution.
CONCLUSION:

After understanding section 439 of the act, it can be stated that this provision under the act
provides the categorized members to go for winding up.

And when we have a contention related to the article of association, it is a portion in a company
which regulates a company and if anything is listed in article of association of company it can
only be amended after the majority of the members as it is a bye-law of the company.

So in the above case it was listed in the article of association not to petition for winding up
unless two directors had consented or the general meeting had resolved or a petitioner held at
least 20% of issued capital.

But when we go for further understanding decision of the case was right, because then this lead
to waiver of their rights.