Significance: in Adip Mittal v Offshore Holding Company Pte Ltd  SGHC 239, the General Division of the Singapore High Court (coram Goh Yihan JC) considered, in the first reported decision on this issue, the legal principles applicable to s 124(1)(b) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), which allows directors to wind up companies. Prior to the IRDA, directors had no legal standing to wind up companies.
First, the director must be able to show that there is a prima facie case that the company ought to be wound up.
Second, if the director can show such a prima facie case, the court may grant permission for the director to commence a winding up application, if it is satisfied that, among other considerations, the winding up application is being made for a legitimate reason and not for an improper purpose.
In determining whether there is a prima facie case for winding up, Goh JC was of the view that it was not appropriate to refer to case law on s 216A of the Companies Act i.e. for application for leave to commence statutory derivative action: .
Instead, the claimant must adduce evidence on affidavit which, on its own and without rebuttal, would be sufficient to prove a case for winding up and would satisfy one of the grounds under s 125(1) of the IRDA: .
On the second requirement, some relevant considerations include (at ):
(a) The circumstances in which the application for permission is brought. E.g., if the director cannot bring about the winding up of the company in another way, then the director would well be justified to apply for permission to commence a winding up application. This will also go towards showing that the director’s application for permission is not for an improper purpose.
(b) The presence of any collateral purpose for bringing the winding up application. This would address the primary factor for a court in deciding whether to grant permission under s 124(2)(a) of the IRDA.
(c) The presence of any allegation of wrongdoing to the company which a director in his or her capacity would be well-placed to raise with the liquidator for further investigation.
(d) The consequences of winding up if an order were eventually made.
(e) The existence of a genuine dispute between the parties as to the grounds for winding up.
(f) The general policy that an insolvent company should be promptly wound up as a matter of public interest.