One of the most significant grounds, although rarely used, for compulsory winding up in common-law jurisdictions is the just and equitable doctrine, which permits a court to order liquidation where continuation of the company would be unfair, impracticable or contrary to the interests of justice, even where insolvency is not established.
Both the DIFC and ADGM insolvency regimes expressly recognise the just and equitable ground for winding up as explored in more detail below.
The “Just and Equitable” Ground in the DIFC
The DIFC insolvency regime, under article 81 of the DIFC Insolvency Law, expressly allows the DIFC Court to wind up a company where it considers it “just and equitable” to do so.
The DIFC framework is a common-law styled statutory regime influenced by English legal principles and interpreted consistently with established common-law approaches. The Court therefore assesses whether the company’s internal breakdown or failure of purpose justifies the exceptional remedy of winding up.
Typical circumstances include:
- shareholder deadlock;
- breakdown of trust and confidence;
- exclusion from management;
- serious misconduct; or
- failure of the company’s commercial purpose.
This is illustrated in Khuram Hussain v Hussain Al-Awlaqi & Ors[1] (Tabarak Partners LLP), where the DIFC Court found an irretrievable breakdown in relations and deadlock in management. With no viable alternative remedy, it ordered winding up on the just and equitable ground. The case illustrates the application of the statutory test rather than creation of a separate equitable doctrine.
However, the remedy remains discretionary and is generally treated as a remedy of last resort where no adequate alternative remedy is available.
The Position in the ADGM
The just and equitable ground in the ADGM is engaged through three principal routes under the insolvency regime:
(i) Court-ordered winding up and the “just and equitable” ground
The ADGM insolvency regime expressly recognises the just and equitable ground for winding up. Under section 199(d) of the ADGM Insolvency Regulations 2022, the Court may order the winding up of a company where it is of the opinion that it is just and equitable to do so.
As in other common-law jurisdictions, the just and equitable ground is generally treated as a remedy of last resort. It is typically invoked where no alternative remedy is adequate to address circumstances such as shareholder deadlock, breakdown of trust and confidence, exclusion from management or the frustration of the company’s commercial purpose.
(ii) Application by the Financial Services Regulator or Registrar
The ADGM framework also permits the Financial Services Regulator or the Registrar to petition the Court for the winding up of a company in specified circumstances. Under section 203 of the ADGM Insolvency Regulations 2022, such a petition may be presented where the relevant authority is of the opinion that the company is unable to pay its debts, has committed a serious contravention of ADGM regulations, it is expedient in the interests of the ADGM, or it is just and equitable that the company be wound up.
This confirms that the ground may be invoked not only in shareholder-initiated proceedings, but also in the context of regulatory oversight and public interest supervision within the ADGM framework.
(iii) Unregistered companies and cross-border insolvency
The ADGM insolvency regime further applies the winding-up framework, including the just and equitable ground, to unregistered companies within its cross-border insolvency regime. An unregistered company may be wound up where the Court considers it just and equitable to do so, provided that the company has a sufficient connection with the ADGM, there is a reasonable prospect that the winding-up will benefit the applicant and the Court has jurisdiction over persons interested in the distribution of the company’s assets.
These provisions reflect the cross-border and international character of the ADGM insolvency regime. Winding-up proceedings in this context may operate on a universal basis and may extend, insofar as enforceable, to assets located outside the ADGM.
Conclusion
The just and equitable ground in the DIFC and ADGM reflects a flexible insolvency mechanism designed to address situations where a company can no longer function in a commercially or relationally viable manner. While rooted in statute, its application is strongly informed by common-law principles, particularly in relation to shareholder breakdown and failure of corporate purpose.
In both jurisdictions, the remedy is applied sparingly and only where no adequate alternative relief exists. However, the ADGM framework also illustrates a broader dimension, incorporating regulatory and cross-border elements alongside traditional shareholder-focused scenarios.
[1] [2009] DIFC CFI 023
Chris is a Chartered Accountant, member of the ICAEW and on the list of approved Insolvency Practitioners of the DIFC and ADGM. He is also a UK, Cyprus and Romania licensed Insolvency Practitioner.
Marios is on the list of approved Insolvency Practitioners of the DIFC and ADGM and a licensed Insolvency Practitioner in Cyprus.
