Winding-up of a company requires substantial grounds; mere disputes between shareholders do not justify winding-up if internal mechanisms can resolve issues.

(Enclosure 1: Winding-up Petition)

Introduction

[1] This case concerns a petition for the winding-up of TBH Wellness (Eco Sanctuary) Sdn Bhd ["R2"] pursuant to s 465(1)(f) and/or (h) of the Companies Act 2016 .

[2] The central issues in this dispute involve allegations of a breakdown in trust and confidence between the shareholders, claims of financial mismanagement, and the question of whether the substratum of the company has failed following the termination of the Licensing Agreement.

[3] Additionally, the case raises considerations of whether the disputes between the parties amount to an irretrievable deadlock and whether winding-up is the appropriate remedy in the circumstances.

[4] The matter necessitates an examination of the nature of the company's incorporation, the conduct of the parties, and the legal framework governing the just and equitable winding-up of a company. The court is required to determine whether the circumstances justify the extreme remedy of liquidation.

Factual Background

[5] The Petitioner and the 1st Respondent, Eiin Hong Pei Shang ["Elin"] entered into a Licensing Agreement on 1 August 2023 for the purpose of setting up R2 as a vehicle to operate a business specializing in women's wellness and care.

[6] Under the agreement, the Petitioner, as the licensor, granted R2 the right to use its "TBH" brand and system. The company's shareholding structure was divided between the Petitioner (holding 45%) and Elin(holding 55%). Chew Kit Seng ['Chew"], a nominee of the Petitioner, and El in were the only two directors of R2.

[7] In the months following R2's incorporation, disputes arose between the parties regarding its management and operations. The Petitioner claims that it has been excluded from the affairs of R2, that Elin has misused company funds, and that the absence of a proper check-and-balance system has caused serious governance concerns.

[8] The Licensing Agreement was subsequently terminated on 23 August 2024, following which the Petitioner filed the present winding-up petition.

[9] Elin, in response, contends that the disputes between the parties stem from commercial disagreements rather than any fundamental breakdown in trust or governance failure. She maintains that R2 remains a viable business, and she has taken necessary steps to address governance issues, including initiating the removal of Chew as a director to resolve the alleged deadlock.

Legal Grounds For Winding-Up

[10] The Petitioner seeks to wind up R2 under s 465(1)(f) and (h) of the Companies Act 2016 .

[11] Section 465 (1)(f) provides that a company may be wound up if the directors have acted in their affairs in their own interests rather than in the interests of the members as a whole, while s 465(1)(h) allows winding-up if the court is of the opinion that it is just and equitable to do so.

[12] In support of its case, the Petitioner relies on the principle established in Ebrahimi v. Westbourne Galleries Ltd [1973] AC 360, where the court held that a company can be wound up on just and equitable grounds when there is a breakdown of mutual trust and confidence, particularly in quasi-partnerships.

[13] The Petitioner also cites Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426, where winding-up was granted due to a deadlock between two equal shareholders, despite the company being profitable.

[14] The Respondent, however, argues that winding-up should not be granted unless there is no alternat