In a recent High Court judgment In The Matter of Green D Project Ireland Limited [2023] IEHC 773, The High Court has dismissed a petition to wind up Green D Project Ireland Limited ("GDPI"), on the grounds that the petitioner, a majority shareholder, failed to establish that the company was unable to pay its debts. The Court considered, among other things, the evidence which must be established by a petitioner in order to successfully secure a winding up Order against a company.
Case Background
The Applicant, a UK based distributor, Green Biofuels Limited (“GBF”) (which was itself under administration in the UK at the time) was the holder of 65% of the issued share capital of GDPI. GBF petitioned the Court under s.569(1)(d) of the Companies Act 2014, for an Order to wind GDPI up on the basis that it was unable to pay its debts, in circumstances where it allegedly owed GBF €40.5 million.
In response to the petition, GDPI argued that the company was not insolvent and strongly disputed that it owed GBF €40.5 million. Furthermore it contested GBF's status as a creditor and claimed that GBF in fact owed it a debt of €5.6 million. GDPI also claimed that the failure of GBF to apprise the court of the sale of its “business and certain assets” to a third party, Certas UK prior to the presentation of the petition, and its subsequent failure to clarify whether or not GBF's debts had been sold to Certas UK were instances of material non-disclosure such as would justify dismissal of the petition.
Court's Findings
The High Court, presided over by Mr. Justice Mark Sanfey, dismissed the petition on several key grounds:
- Inability to Establish Insolvency: GBF failed to convincingly demonstrate that GDPR was unable to pay its debts, as the evidence provided was deemed insufficient and unreliable. The Court added that in the absence of cross-examination, it would not be appropriate to draw conclusions about the solvency of the company.
- Material Non-Disclosure: The court found that GBF had not disclosed crucial information regarding the transfer of GDPI's alleged debt to Certas UK prior to filing the petition. This non-disclosure was a significant factor in the Court's decision, as full transparency was essential in such proceedings.
- Lack of Creditor Standing: GBF did not adequately prove that it had standing as a creditor to bring the petition against GDPI. Under the Companies Act 2014, standing as a creditor is a critical requirement to establish the requisite locus standi to bring a winding up petition and the Court was not satisfied that GBF had definitively, as a matter of evidence, proved that it was in fact a creditor of GBF.
- Unreliable Evidence: The Court found that the evidence presented by GBF concerning GDPI's solvency was found to be unreliable. The court noted that without the opportunity for cross-examination, the evidence could not be properly tested and validated. The Court emphasised the need for credible and reliable evidence to establish insolvency.
Legal Implications
The decision by the High Court underscores the evidentiary and procedural standards required to successfully secure an Order to wind up a company and highlights the necessity for petitioners to present a clear and unambiguous case, particularly when alleging a company's inability to pay its debts. The case reinforces the necessity for a petitioner to provide reliable evidence when establishing a company's insolvency and to maintain full transparency throughout the process.
A copy of the judgment can be found here.
