Liquidators and a major shareholder of Podular Housing Systems Limited applied to the court for orders to confirm the validity of the appointment of the liquidators.
The company has two shareholders, the second application was a 95% majority shareholder, and the respondent is a 5% minority shareholder. The respondent is also the sole director of the company. The liquidators were appointed by the majority shareholder by way of a special resolution. The minority shareholder did not sign the resolution and wished to appoint different liquidators.
Section 122 of the Companies Act 1993 sets out requirements for resolution in lieu of a meeting. As the resolution was not signed by at least 75% of the shareholders of the company, the Court found that the company’s resolution appointing the liquidators clearly did not comply with the requirements of the section. The Court emphasized that the supervisory powers of the Court over liquidations under section 284(1) should not be used to sanction a clear contravention of another section of the Act and found it inappropriate to validate the appointment of the liquidators.
Although the appointment of the liquidators was not validated, the Court ordered the appointment of the existing liquidators pursuant to section 241(2)(c) of the Act. The existing liquidators were experienced practitioners, they had already undertaken a significant amount of work, their replacement did not confer any apparent benefit to the company’s creditors and the independence of the alternative appointees suggested by the minority shareholder is questionable.
Full judgement: Francis v Innes [2022] NZHC 3354
Article compiled by Lucy Rong, Junior in-house counsel at Waterstone
