Day 138 Compulsory wound up

Compulsory wound up

We have interpreted the two important remedies related to the derivative action and oppressive or unfair conducts. However, there are till several orders can be made by the court for the purpose to protect rights of members. For example, the court may intervene a compulsory wound up of the business, request a statutory injunction to specific members and grant the members to inspect the company’s books. 

There are many circumstances that give the court the power to wind up a corporation. Firstly, if the entity is not currently operating, then the court may force to shut it down. Section 461 Corporations Act(2001) elaborates this provision, which stated when the company has no members, not commenced business within one year from its incorporation or suspends its business for a whole year can be entitled to a compulsory wound up. In addition, if the directors were not acting on behalf of the company’s best interest, the members may also apply for this order. Moreover, as we have discussed in the s.233(2) the court has the power to force the procedure if there is oppression, unfairly prejudicial or unfairly discriminatory actions in company affairs. (s.461(1) (f & g)) At last and probably the most common approach, the court may produce the order anytime if it seems just and equitable. For instance, if there is a deadlock (directors would never meet up with agreement), fraud or misconduct of the management, the court could make the order to protect creditors and members. 

Apart from this compulsory wind up, the statutory injunction is introduced in S.1324 to protect members’ rights as well. Basically, the injunction is a form of order instructed by the court to request or prohibit a specific party to act in a particular way. In most cases, the court makes this injunction to prevent entities to contravene the Corporations Act provisions. Both ASIC and the member whose interest has been compromised by conduct in contrast to the act may apply for this injunction. 

In conclusion, the statutory act has supported a broad rang of protections for the member’s rights such as: authorized inspections of company books (S.247). member’s right to call a general meeting (S.249 F) or member’s right to appoint a proxy.(S.249X). People should be aware of these provision and protect their rights when it is necessary.