LEGAL PRINCIPLE: COMPANY LAW — Winding-Up — Inability to Pay Debts — Distinction Between Winding-Up Petition and Ordinary Debt Recovery Action
PRINCIPLE STATEMENT
A winding-up petition for inability to pay debt is not to be treated like a claim for payment of debt. It is simply winding-up of the company for insolvency. The debt must be admitted or known or certain.
RATIO DECIDENDI (SOURCE)
Per Onu, JSC, in Air Via Ltd. v. Oriental Airlines Ltd. (2004) NLC-132000(SC) at p. 7; Para E.
"The petition for winding-up of a company for inability to pay debt or insolvency is not to be treated like a claim for the payment of debt. As mentioned above it is simply winding-up of the company for insolvency. The debt must be admitted or known or certain."
EXPLANATION / SCOPE
Winding-up is distinct from debt recovery. The principle applies to company law. The debt must be admitted or certain. The rule prevents use of winding-up as a debt collection tool. The court will require strict proof. The principle is well-established.
