In the Matter of Equity Display Centre Limited and In the Matter of the Companies Act
The bottom line
#Kenya's High Court confirmed that an unpaid creditor can wind up a company even where a receiver already controls all its assets.
What this practically means
#Executive summary
#Key legal issues
#Whether the appointment of a receiver over all the company's assets bars a winding up order
No - the existence of a debenture and receiver is not by itself a ground to refuse a winding up order
Counsel for the secured creditor argued that appointing a liquidator would be pointless and would clash with the receiver already in charge of the assets. The court invoked section 222(1) of the Companies Act, which forbids refusing a winding up order on the ground only that assets are mortgaged in excess of their value or that the company has no assets.
Whether it is just and equitable to wind up the company on an unsecured creditor's petition
Yes - where no other remedy is open to the petitioning creditor, winding up is just and equitable
The petitioner was an unsecured creditor owed Kshs 306,401/15 with no means of recovery; the directors had left the country and even the secured creditor was unlikely to recover in full. Relying on the wishes of unsecured creditors and the entitlement of an unpaid creditor as of right, the court held winding up was just and equitable.
Legal principles established
#- The court may not refuse a winding up order merely because the assets are mortgaged to an amount equal to or exceeding the assets, or because the company has no assets
- A creditor who cannot obtain payment is entitled as of right to a winding up order, subject to the court's power to give effect to the wishes of the majority of creditors
Court orders
#- 1.A winding up order is made against Equity Display Centre Limited
- 2.The Official Receiver is appointed as liquidator
- 3.Costs of the Petition to be borne by the Company
- Jurisdiction invoked
- Companies Act (Cap 486), section 222(1) - winding up jurisdiction
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "In the Matter of Equity Display Centre Limited and In the Matter of the Companies Act", Case Analysis (1989). Winding Up Cause 29 of 1988. Source:
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.