This is a Court of Appeal decision about winding up a company on the "just and equitable" ground under section 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) ("IRDA"). The case is important for shareholders who are stuck in a broken business relationship. It explains when a court will step in and shut a company down and when it will not. In this case, the court dismissed the appeal and the company stayed open.
The Facts
The company sought to be wound up, LMO Consulting Pte Ltd ("LMO"), provides regulatory compliance services, trade operations support and corporate services. It is a profitable, ongoing business. The appellant, Gan Yuan Hong, was the company's sole executive director and owned 60% of the shares. The respondent, Siow Chee Wee, owned the remaining 40% and had been a non-executive director until his resignation on 17 December 2024.
By 2024, the relationship between the two directors had broken down, and buy-out talks between them also failed. The appellant then tried to voluntarily wind up the company, but the respondent refused to give his assent, which was necessary to approve this: a voluntary winding up requires a special resolution passed by a 75% majority, which the appellant, holding only 60%, could not pass alone.
The appellant subsequently applied to the High Court to compel a winding up under section 125(1)(i) of the IRDA. He argued the relationship between the directors had broken down completely and that this created a "deadlock" and an inability to exit the company. The respondent argued that there was no management deadlock since he had already stepped back as director, further accusing the appellant of diverting LMO's business to a rival company, Godwin Austen Advisory Pte Ltd, of which the appellant was the sole shareholder and director.
The Lower Court's Decision
The High Court rejected the winding-up application stating that:
- The company was not built on personal trust between the two men, as it would be in a partnership or quasi-partnership (see Ebrahimi v Westbourne Galleries Ltd [1973] AC 360).
- There was no real management deadlock. As sole director, the appellant could still run the company. Even for meetings, he could bring in another shareholder to meet the two-person quorum, without needing the respondent.
The court also found the appellant may have been diverting business away from the company and that, because the just and equitable jurisdiction is an equitable one, the appellant's own conduct meant he had not come to court with clean hands, which weighed against granting relief.
The Court of Appeal's Decision
The Court of Appeal agreed with the High Court and dismissed the appeal. Winding up on "just and equitable" grounds is a broad power. However, the notion of unfairness is the foundation of the court's jurisdiction to wind up a company on the just and equitable ground (Perennial (Capitol) Pte Ltd v Capitol Investment Holdings Pte Ltd [2018] 1 SLR 763 at [40]). As a result, where there is a viable mechanism for exit, this would usually negate the "unfairness" required to justify winding up on this ground. Hence, if a shareholder has a workable way to exit the company, that usually removes any unfairness and courts will not order a winding up just because the shareholder relationship has soured.
The Two-Part Test
The Court of Appeal, drawing on its earlier decisions in Ting Shwu Ping v Scanone Pte Ltd [2017] 1 SLR 95 and Tan Yew Huat v Sin Joo Huat Hardware Pte Ltd [2024] SGCA 27, set out what a shareholder must show:
First, there must be a justifiable ground for not maintaining the company as a going concern; and
Second, there must be no other way for the shareholder to leave the company.
Some instances that might justify winding up include:
- The company can no longer achieve its original purpose.
- The business is run fraudulently.
- The company is really just an incorporated partnership, and the members can no longer work together.
- Minority shareholders have been oppressed or treated unfairly by those in control and have justifiably lost confidence in the management of the company.
- A shareholder is unfairly shut out of management, in breach of an earlier understanding that he would be allowed to take part in running the company.
Why This Case Failed
No partnership-style trust. The respondent bought his shares from someone else and he was never involved in daily operations. There was no relationship of personal trust to break down.
Unequal shareholding mattered. The court noted that if both parties held equal shares, a genuine deadlock might exist. But the appellant held 60%. He could simply bring in a new shareholder to meet the quorum requirement for meetings. So there was no real deadlock.
Difficulty leaving is not enough on its own. The appellant argued he could not exit the company. But the court said that having a hard time leaving, without more, does not justify a winding up. There must also be a genuine complaint about how the company has been run.
A viable way out already existed. LMO's constitution contained no pre-emption rights or other restrictions on the sale of shares. The appellant, as majority shareholder, could simply sell his 60% stake to a buyer at any time. This was different from a minority shareholder who technically can sell shares, but cannot find a real buyer.
No unfair "locked in" expectation. The appellant claimed both parties expected that if the relationship broke down, they would not be trapped as shareholders. The court rejected this. The respondent's own letter had proposed a court-ordered buyout as an option, which was inconsistent with this claim.
Conclusion
Gan Yuan Hong confirms that a breakdown in the shareholder relationship, on its own, is not enough to wind up a solvent and profitable company. What matters is unfairness and where a shareholder holds the power to resolve the difficulty, or a genuine route to exit exists, that unfairness will usually be absent. The decision therefore raises the bar for anyone seeking a just and equitable winding up, particularly a shareholder who is in control of the company. Before petitioning, such a shareholder should first exhaust the real alternatives - selling the shares, seeking a court-ordered buy-out under section 125(3) of the IRDA, or pursuing oppression relief under section 216 of the Companies Act - since the availability of any of these will generally defeat the application.