LEGAL PRINCIPLE: COMPANY LAW — Winding-Up — Inability to Pay Debts — Need for Caution in Terminating Life of a Company
PRINCIPLE STATEMENT
Care and utmost caution must be exercised in proceedings involving the termination of a company's life. The court must halt a petition likely to cause irreversible damage, especially where the debt is disputed.
RATIO DECIDENDI (SOURCE)
Per Onu, JSC, in Air Via Ltd. v. Oriental Airlines Ltd. (2004) NLC-132000(SC) at p. 20; Paras C–D.
"Care and utmost caution must be exercised by the institution of justice in proceedings involving the termination of the life of a company with responsibility not only to the society but also to the section of the public namely, its employees who may be thrown into economic hardship of unemployment. Hence the need for the court to halt a petition of the type brought by the appellant likely to cause irreversible and incalculable damage especially when the circumstances of the case show that the respondent had disputed the debt alleged to be owed."
EXPLANATION / SCOPE
Winding-up a company requires utmost caution. The principle applies to company law. The court considers societal impact and employee hardship. The rule protects against irreversible damage. The court will halt petitions on disputed debts. The principle is well-established.