The grounds for a court to order the compulsory winding up (liquidation) of a company are stipulated under Section 247 of the Companies Code, 1963 (Act 179), which was the applicable law in Ghana at the time of this exam in 2014. Although superseded by the Companies Act, 2019 (Act 992) in modern practice, the principles remain similar, emphasizing protection of creditors like banks. In banking contexts, such as at Stanbic Bank Ghana, understanding these grounds is essential for risk management in corporate lending, allowing timely petitions to court for recovery when a borrower company shows signs of insolvency, aligning with BoG’s Capital Requirements Directive and Basel II/III standards to mitigate credit risk post-2017-2019 banking cleanup, where several institutions like Capital Bank were wound up due to inability to pay debts.

The court may order winding up on the following grounds:

• Special Resolution by the Company: If the company passes a special resolution (requiring at least 75% approval) to be wound up by the court. This is rare but occurs when shareholders recognize insolvency early. In practice, banks like Ecobank Ghana monitor corporate clients’ resolutions via compliance checks under Act 930, enabling proactive engagement to restructure debts before court involvement, enhancing profitability through avoided losses.
• Default in Statutory Obligations: If the company fails to deliver the statutory report to the Registrar of Companies or hold the statutory meeting within the required timelines post-incorporation. This grounds highlights governance failures, as seen in UT Bank’s collapse due to poor compliance, prompting BoG interventions. Banks use this in due diligence for lending, ensuring BoG approval feasibility by verifying statutory filings.
• Failure to Commence or Suspension of Business: If the company does not start business within one year of incorporation or suspends operations for a whole year. This indicates dormancy, risking creditor interests. For instance, during post-DDEP recovery in 2023-2024, banks petitioned for winding up dormant firms to realize securities, supporting liquidity under BoG’s Liquidity Risk Management Guidelines.
• Reduction in Number of Members: If the membership falls below the legal minimum—two for private companies or seven for public companies. This breaches formation requirements, potentially leading to personal liability for directors. In Ghanaian banking, this ground is invoked in small enterprise lending at GCB Bank, were member reductions signal instability, triggering tort vicarious liability reviews for ethical collections.
• Inability to Pay Debts: The most common ground, where the company is deemed unable to pay its debts if it fails to meet a demand for payment exceeding a specified amount (under Act 179, typically GH¢500 or as proven insolvent). Proof includes unsatisfied judgments or balance sheet insolvency. Banks frequently petition on this basis, e.g., Access Bank Ghana’s recapitalization efforts involved winding up petitions against defaulting corporates, aligning with BoG Notice No. BG/GOV/SEC/2023/05 for capital adequacy and reducing non-performing loans for resilience.
• Just and Equitable Grounds: If the court opines it is just and equitable, such as in cases of deadlock among directors, oppression of minority shareholders, or loss of substratum (company’s main purpose unattainable). This flexible ground was used in historical cases like the 2017-2019 cleanup, where governance issues justified windings. Comparatively, global banks like Barclays employ similar under UK Insolvency Act for fair resolutions, integrating into Ghana’s digital banking trends by addressing fintech partnership failures under Act 987, promoting ethical practices.

In day-to-day operations, banks prepare affidavits and evidence for High Court petitions, considering costs and publicity as per conflict resolution principles. Post-2025 trends emphasize sustainable banking, where early detection via cyber security directives prevents escalations, ensuring compliance and profitability.