Court Sets Out Principles for Winding Up by Special Resolution

In Re: Bu Shen Xi (S) Pte Ltd [2024] SGHC 247, the Singapore High Court considered an application for a winding-up order in respect of a company on the basis of sections 125(1)(a) and/or 125(1)(e) of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA“). In particular, the Court set out the principles and reasoning for the less commonly used section 125(1)(a), which deals with winding up by special resolution.

The Company had resolved by a special resolution that it be wound up by the court. This special resolution was signed by the majority shareholders, and the Company’s position was that the remaining minority shareholder did not have voting rights to prevent the passage of the resolution as she had not paid the full sum payable in respect of her share capital. The Company thus sought a winding-up order pursuant to section 125(1)(a) of the IRDA or, in the alternative, pursuant to section 125(1)(e).

The Court set out the applicable principles in considering a winding-up application under section 125(1)(a):

  1. A court would first determine if the special resolution was validly passed, which is a prerequisite for the court’s discretion to grant or to refuse the winding-up application.
  2. The court would then determine whether to exercise that discretion, for which it would consider: (i) the creditors’ interests; and (ii) the presence of bad faith or other untoward circumstances.

On the facts, the Court was satisfied that a winding-up order should be made pursuant to section 125(1)(a) in the present case.

  1. The Court was satisfied that the special resolution had been validly passed.
  2. The interests of the Company’s creditors would not be compromised by a winding-up order.
  3. There was nothing on the facts which suggested any unconscionable or inequitable circumstances which justified withholding a winding-up order.

In the alternative, the Court would also have been willing to grant the winding up order under section 125(1)(e). Applying the test of cash flow insolvency to the evidence from the Company, the Court found that the Company was unable to pay its debts.


 

Disclaimer

Rajah & Tann Asia is a network of member firms with local legal practices in Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Our Asian network also includes our regional office in China as well as regional desks focused on Brunei, Japan and South Asia. Member firms are independently constituted and regulated in accordance with relevant local requirements.

The contents of this publication are owned by Rajah & Tann Asia together with each of its member firms and are subject to all relevant protection (including but not limited to copyright protection) under the laws of each of the countries where the member firm operates and, through international treaties, other countries. No part of this publication may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of Rajah & Tann Asia or its respective member firms.

Please note also that whilst the information in this publication is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as legal advice or a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. You should seek legal advice for your specific situation. In addition, the information in this publication does not create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on the information in this publication.

CONTACTS

Partner
+65 6232 0428
Singapore,
Partner
+65 6232 0141
China, Singapore,

Country

EXPERTISE

Share

Rajah & Tann Asia is a network of legal practices based in Asia.

Member firms are independently constituted and regulated in accordance with relevant local legal requirements. Services provided by a member firm are governed by the terms of engagement between the member firm and the client.

This website is solely intended to provide general information and does not provide any advice or create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on this website.

© 2024 Rajah & Tann Singapore LLP. All rights reserved. Rajah & Tann Singapore LLP (UEN T08LL0005E) is registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A) with limited liability.