LEGAL PRINCIPLE: COMPANY LAW — Winding-Up — Inability to Pay Debts — Essential Ingredients Required to Ground Winding-Up Petition
PRINCIPLE STATEMENT
Section 408 of CAMA provides that a company may be wound up if it is unable to pay its debts. The essential ingredients are: (a) there must be a debt, (b) the debt must be due, and (c) the company must be unable to pay the debt.
RATIO DECIDENDI (SOURCE)
Per Uwais, CJN, in Air Via Ltd. v. Oriental Airlines Ltd. (2004) NLC-132000(SC) at p. 21; Paras E–A.
"Section 408 of the Companies and Allied Matters Act, Cap. 59 of the Laws of the Federation of Nigeria, 1990 provides inter alia that a company may be wound-up by court if 'the company is unable to pay its debts.' For this to take place the following essential ingredients are required:— (a) there must be a debt, (b) the debt must be due, and (c) the company to be wound-up is unable to pay the debt."
EXPLANATION / SCOPE
Three ingredients are required for winding-up: debt, due, and inability to pay. The principle applies to company law. All must be proved. The rule ensures proper grounds. The court will examine each element. The principle is well-established.