Companies in Court

Court Wind-up Company despite the Properties excess valuation

The petitioner a mortgagee of a piece of real property instituted winding proceedings against the defendant on the grounds that it was not able to pay its debts. The defendant in its submission claimed: -

• It was in the process of applying to refinance the said property, though it was unable to produce evidence.

• The petitioner should exhaust the security before proceeding with the winding-up petition.

• Despite the property value is in excess of the debt owing, the property was tenanted and vacant possession will not be cheap.

• The company still has not been able obtain fresh financing

• There was a probability that the property if realized may be still insufficient to the repay the petitioner.

• The winding-up order was the most appropriate in the circumstances.

Court will not Interfere with a Company's Management Decision

Recently the High Court of Singapore held that the Court will not interfere in how a company's management has decided to treat profits derived from the sale of a real property.

The plaintiff (a shareholder of the company) view that the "gain" should be an extraordinary profit whilst the majority chose to treat the gain as a normal trading profit. The Court held that if the gain is to be treated as an extraordinary item, the gain would have to be taken to a reserve and would not be able to be distributed to the shareholders by way of dividends. To distribute the gain, the company has to be wound up.

• Company was a developer and is consistent in the way it treated the gain derived from the sale.

• The plaintiff was not oppressed, not unfairly discriminated against, nor unfairly prejudiced or that their interests has been disregarded.

• The Court should not interfere with management decisions or try to guess them.