Compulsory winding up, Business Law and Ethics

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Compulsory winding up:

At the hearing other creditors of the company may oppose the petition.  If so, the court is likely to decide in favour of those to whom the larger amount is owing.  But the court may also consider the reasons for the differences between the creditors:

                                      Case: RE SOUTHARD & CO. (1979)

A holding company arranged for its subsidiary, of which it was the largest creditor, to go into voluntary liquidation.  The holding company, as a creditor, later petitioned for the compulsory winding up of the subsidiary in order to oust the original liquidator.  The trade creditors, to whom the subsidiary owned smaller sums, wished the voluntary liquidation to continue.

Held:

The court might consider the reasons for the petition and the opposition to it and was not bound to accede to the wishes of the larger creditor.  The petition was dismissed.


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