Article / 1 Jul 2025
In this month’s update we:
In Dosanjh v Balendran & Webb Estate Developments Ltd [2025] EWHC 507 (Ch), the High Court ordered a property investment company to be wound up on the ground that it was just and equitable to do so following an irretrievable breakdown in the relationship between the two shareholder-directors.
Under section 122(1)(g) Insolvency Act 1986, a company can be wound up by the court if it is just and equitable to do so. Where a shareholder petitions the court on this ground, the court may refuse to wind up the company if it believes that another remedy is available and the shareholder is acting unreasonably in not pursuing that other remedy. The shareholder must also show that a tangible benefit will be derived from the winding up – usually, that there will be a surplus for distribution to the shareholders.
A just and equitable winding up may be ordered where there is a functional deadlock – that is, the shareholders have fallen out and their inability to cooperate leads to the company’s inability to function at board or shareholder level. If the company is a quasi-partnership, a winding up may also be justified where there has been an irretrievable breakdown in trust and confidence between the participating shareholders.
The case concerned a property investment company in which Mr Dosanjh and Mr Balendran were the only directors and equal shareholders.
A dispute arose between the directors about how monthly payments to them should be treated in the company’s accounts: Mr Dosanjh said that the payments were loan repayments, but Mr Balendran claimed they were expenses and even produced a historic invoice from his services company to support this claim. The dispute led to years of accounts either not being agreed or being filed unilaterally.
A further issue between the parties involved Mr Balendran’s attempt to engineer the sale of one of the company’s properties, Aldwych House, to a company in which he was a 50% shareholder. Mr Balendran was not transparent about his interest in the buyer or its plans to seek planning permission which would increase the property’s value.
The relationship between Mr Dosanjh and Mr Balendran was marked by persistent disagreements on financial matters and property management, as well as failed attempts at alternative resolutions like a demerger or a buyout. As a result, Mr Dosanjh petitioned for the company to be wound up on the just and equitable ground.
The Judge found that there had been an irretrievable breakdown in the relationship of trust and confidence between the two shareholders, and that the management of the company was functionally deadlocked. In particular, an email exchange between the parties in March 2020 showed an agreement to treat the monthly payments as repayments of loans and there was no basis for Mr Balendran’s assertion that the payments were expenses. The Judge found that the invoice from Mr Balendran’s services company was a backdated fiction, created to give a false impression.
Mr Balendran’s conduct regarding the attempted sale of Aldwych House, including his lack of transparency and conflict of interest, was found to have been fatal to any remaining relationship of trust and confidence. The Judge found that Mr Balendran had adopted an entirely entrenched position and was unwilling to countenance any suggestions contrary to his own views.
Having concluded that either the breakdown in trust and confidence or the functional deadlock entitled Mr Dosanjh to relief, the Court went on to consider whether he was unreasonable in seeking a winding up rather than an alternative remedy. The Judge found that Mr Dosanjh was not acting unreasonably and there was no realistic alternative other than winding up. While Mr Balendran had proposed purchasing Mr Dosanjh’s shares, his offers were either unrealistic or subject to significant contingencies, making them, in the Judge’s view, a “recipe for yet further dispute and disagreement”.
Finding that there was no realistic alternative, the Judge ordered that the company be wound up by the Court.
Winding up is often seen as a remedy of last resort. But shareholders in quasi-partnership companies facing severe and persistent disputes should be reassured that if attempts at resolution fail, and the relationship reaches a point of irreparable breakdown and functional deadlock, then seeking a just and equitable winding up is a legitimate and potentially successful route. This will be particularly true where alternative solutions are not genuinely viable or are proposed by a party who has shown themselves to be unreasonable or untrustworthy.
The court will look at the reality of the relationship and the functionality of the company in determining whether winding up is just and equitable. People who find themselves in this situation should document disagreements thoroughly, particularly those relating to fundamental decisions and financial matters, as evidence of deadlock and breakdown. They should also explore alternative dispute resolution methods or separation options (like buyouts or demergers) to demonstrate that winding up is indeed a last resort.
The High Court has ordered that a number of documents be removed from a company’s public register where those filings were made without the company’s authority.
The Registrar of Companies maintains a public register of essential information about UK companies via Companies House. The register is designed to provide transparency, allowing third parties to find out key details such as the identity of a company’s directors, details of persons with significant control over the company (its “PSCs”) and its financial status. Companies are under a statutory obligation to file various documents with the Registrar of Companies which then appear on the public register. That obligation, and the resulting transparency about UK companies, are the “quid pro quo” for the protection afforded to a company’s founders by its limited liability status.
If ordered by the court, the Registrar must remove documents from a company’s public record where they are invalid or ineffective, have been filed without authority or are factually inaccurate (section 1096 Companies Act 2006). Where a document has legal consequences, there is a balancing test: the court may only order such a filing to be removed if satisfied that the interests of the company in removing it outweigh the interests of any other person in the information continuing to appear on the register.
Hasan & anor v Al-Raudi & anor [2025] EWHC 1272 (Ch) involved a company with three directors. In July 2023, a third party filed forms at Companies House recording the termination of the three directors and the appointment of the third party as a director in their place. Forms were also filed notifying Companies House that the third party was a PSC of the company and changing the company’s registered office address.
The original directors applied for an order seeking the removal of these documents from Companies House. The directors said they had not resigned or been validly removed, and had not authorised any of the filings. The third party accepted that he was not a registered director or shareholder, but claimed that he was the beneficial owner of shares in the company. He said that an agreement with the directors from December 2021, coupled with a power of attorney, gave him significant control over the company, including the power to remove and appoint directors.
The Judge ordered that almost all of the disputed documents be removed from the register.
He found that the third party lacked any authority to file the documents or to appoint and remove directors under either the company’s articles of association or the Companies Act 2006. As the Judge noted, a company acts through its directors, who are authorised to manage the company and register documents. The third party’s assertion of “significant control” or reliance on private agreements did not grant him these powers, and could not override the formal constitution of the company or the requirements of the Companies Act. To the extent that the third party had grievances against the directors, the Judge said they should be pursued through separate legal proceedings and not by unilaterally filing documents at Companies House.
The Judge also considered whether any of the disputed filings had legal consequences and the related balancing test. He found that most of the filings did not have legal consequences simply by virtue of their registration. For example, the notices of director appointments or removals, and the PSC notification, did not derive their validity or effect from being registered; the filings merely recorded information and the validity of the underlying act was independent of whether or not a form was filed. The argument that filing those documents constitutes compliance with a statutory obligation, and so has legal consequences, was rejected.
But the change of registered office address (via a form AD01) did have legal consequences. The Companies Act provides that the change only takes effect when the form is registered. This is because a registered office provides an address for the service of legal proceedings, directly affecting the public and legal interactions. So, for this document the Court applied the balancing test. The Judge found that the interests of the company and its directors in ensuring legal documents were sent to the legitimate address so they could be dealt with, outweighed the third party’s interest in maintaining an unauthorised filing.
As the third party had no authority to file any of the documents, and their registration either had no legal consequences or, in the case of the registered office, the balance of interests favoured removal, the Court ordered the documents to be removed from the public register.
The decision will be welcome news for companies and their directors. It confirms that a company’s articles of association and formal company law dictate who has authority to act on behalf of a company and unilateral actions based on alleged private agreements, beneficial ownership or even a mere assertion of “significant control” are unlikely to be upheld by the courts.
The Judge’s comments on which filings have “legal consequences” are also helpful, clarifying that this is primarily aimed at those filings where the underlying event only becomes effective when the relevant filing is registered. Even then, the balancing test is likely to protect the company and its current directors where their obligations and duties will be affected by the disputed filings.
The High Court has held that a requirement in a completion accounts mechanism for the seller to “notify” the buyer if it disputed the buyer’s draft accounts did not engage the formal notice provisions of the sale agreement. As a result, the seller’s dispute notice had been validly served despite not being sent to the individual specified by the buyer in the formal notice clause.
This case (Inspired Education Online v Crombie [2025] EWHC 1236 (Ch)) arose out of the acquisition of a target from an individual seller who was also the target’s founder, sole director and CEO. Under the sale agreement, the consideration was to be verified and, if necessary, adjusted via a completion accounts mechanism.
The buyer prepared the draft completion accounts and these were emailed to the seller by the buyer’s accountant. Under the agreement, the seller then had 20 working days in which to “notify the buyer in writing” of any disagreements with those draft accounts. If the seller failed to do this, a deeming provision in the agreement provided that the buyer’s draft accounts would be deemed to be agreed. Within the 20-day period, the seller replied by email to the buyer’s accountant, stating that he did not agree with the draft accounts and setting out each item, the basis for dispute and a proposed compromise.
The buyer argued that the seller’s email was invalid because it did not comply with the formal notice provisions in the operative part of the agreement. Those provisions said that “any notice” given “under or `in connection with this agreement”, if given by email, had to be sent to the contact specified in that clause. This was the chair and CEO of the buyer’s parent company, not its accountants. So, the buyer argued, as the seller’s dispute notice was invalid, he had failed to dispute the draft completion accounts within the required period meaning the deeming provision applied and he was deemed to have agreed to the buyer’s draft accounts.
The Judge disagreed with the buyer, finding that the seller’s email was a valid notification objecting to the draft accounts. The Judge said that the formal notice provision applied to “any written notice”, but the completion accounts provisions did not require a formal “notice” as such. In fact, the Judge said, the parties had chosen to use a “different (and very general) formulation” that did not require a notice to be given but merely required the seller to “notify the buyer in writing”. This implied that a less formal process was intended.
The Judge said his interpretation was supported by wording in the deeming provision which provided that this operated where the seller failed to make “any written notification” within the relevant period. This signalled that there could be a number of different ways in which a notification could be given and the deeming provision would only kick in if there was a failure to make “any” kind of written notification.
If the parties had intended the formal notice provisions to apply to notifications given under the completion accounts mechanism, they could have said so. But, having chosen not to, the Judge found they must have intended to allow for less formal notifications to be given.
This decision contrasts with another recent decision in Hughes v CSC Computer Sciences Ltd [2025] EWHC 302. In that case, the Court found that a buyer’s earn-out calculations were invalid as they had not been sent to the seller in accordance with the formal notice provisions in the relevant agreement. But the notice provision in Hughes was drafted in much broader terms: it applied to “Any notice or other communication under or in connection with this Agreement…”. This may account for the different approach taken by the Judge in the more recent decision.
Given the uncertainty caused by the two contrasting decisions, parties should carefully consider all the different notifications that may need to be given under an agreement and set out clearly whether the formal notice provisions will apply in each case or whether a less formal notification may be acceptable.
First published in Accountancy Daily.
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