For the first time in this jurisdiction, the Court has ordered the winding up of a listed PLC on the just and equitable ground under section 122(1)(g) of the Insolvency Act 1986 for loss of substratum.
In Re Klimvest plc  EWHC 596 (Ch) our clients’ petition sought to have the PLC wound up on the basis that, amongst other things, the purpose or substratum of the company had come to an end. This followed the sale of the company’s assets and business in January 2019
Following the asset sale, the controlling shareholder sought to cause the company to utilise the sale proceeds for the purpose of making new investments, rather than distributing the proceeds of sale to the shareholders pursuant to a liquidation.
Our clients sought to have the company wound up so that their respective investments could be returned to them. The petition was defended by the controlling shareholder on various grounds, including that making investments fell within the company’s purpose and therefore the purpose had not come to an end.
Following a two week trial in February 2022, His Honour Judge Cawson QC (sitting as a High Court Judge) handed down a 70 page judgment on 17 March 2022 in which he found that the identification of a company’s purpose or substratum is a matter of equity between the company – even a listed PLC – and its shareholders, rather than a formalistic exercise in construing the corporate constitution. The purpose is lost, potentially triggering winding-up by the Court, not only where carrying it out is “practically impossible” for the company, but also where it has been, or will be, abandoned. In this case, he found that the carrying out of the company’s purpose following the asset sale was both practically impossible and had in practice been abandoned.
He therefore ordered that the company should be wound up.
Tamar Halevy, partner at Marriott Harrison, commented: “This is a significant victory for our clients, and for the other minority shareholders in the company who supported them, allowing them finally to have their investments in the company returned, rather than being locked indefinitely into a new venture for which they never signed up. This is also an important decision for minority shareholders in PLCs more generally as it has broadened their options.”
Marriott Harrison instructed Daniel Lightman QC and Max Marenbon, both of Serle Court.
Please follow this link to access the judgment. Re Klimvest plc  EWHC 596 (Ch)