Minority Shareholders and Winding Up a Dormant Family Company: What the Sindh High Court Decided in J.C.M. No. 19 of 2022
A minority shareholder in a private company cannot force a winding up merely because the business has stopped and trust has broken down. On 9 September 2026 the Sindh High Court dismissed such a petition under section 308(2) of the Companies Act, 2017, holding that suspension of business is a winding-up ground only for listed companies, that oppression had not been proved, and that the petitioners were unreasonably refusing another remedy: the majority's offer to buy their shares.
Many Karachi companies are family businesses incorporated a generation ago, and many now sit dormant while the heirs of the founders argue over land, rent and control. The instinctive move for an unhappy shareholder is to petition for winding up and let a liquidator sell everything. This judgment shows why that move often fails. Anyone searching for the best corporate lawyer in Karachi to get out of a deadlocked family company should first ask whether an exit by share sale is on the table, because the court will ask the same question. This note sets out the facts, the four grounds the court rejected, and what remains open.
The dispute in brief
The company was a private limited company set up in Karachi by two founders, a husband and wife, to manufacture auto parts. After both died, their children and other heirs became the shareholders and directors. Manufacturing stopped in 2010, and the main remaining asset was factory land in Federal B Area, part of which was let out or caught up in a separate sale suit.
Control became contested. In earlier company proceedings (J.C.M. No. 17 of 2021) the Sindh High Court restored one of the petitioners as chief executive after a mid-term board election and directed fresh elections. Two of the heirs, holding about 27 per cent and a fraction of one per cent respectively according to their counsel, then petitioned under sections 304 and 305 of the Companies Act, 2017 for the company to be wound up and a liquidator appointed.
They relied on section 301(g)(iii) and (iv) and section 301(m), alleging that the other directors were running private business from company premises and pocketing rent, that the family litigation showed a total breakdown of trust, and that the shareholders had already agreed to end the company through a family undertaking (an iqrarnama) and a board resolution of 18 April 2020 to sell part of the factory land and distribute the proceeds. The respondents, other heirs of the founders, replied that they wanted to revive the business and had offered to buy the petitioners' shares.
The question before the court
Should a dormant private company be wound up by the court at the instance of minority shareholders, on the grounds that its business had been suspended for years, that the majority was oppressing the minority and misappropriating income, that the shareholders had already agreed to wind it up, or that it was simply just and equitable to do so, when the majority was willing to buy the minority out?
What the court decided
Justice Saman Rafat Imtiaz heard the petition on 3 August 2026 and dismissed it by a judgment announced on 9 September 2026. The court took each ground in turn:
- Suspended business: rejected. Suspension of business "for one whole year is a ground of winding up only of a listed company" under section 301(m). The company was private, so the admitted fact that it had been idle since 2010 did not help the petitioners.
- Oppression and misappropriation: not proved. Counsel could not produce evidence of the rent said to have been diverted, the private business or the removal of machinery, and argued that a liquidator should investigate instead. The court held that "the ground of oppression has not been brought home".
- Prior agreement to wind up: rejected. Neither the undertaking nor the 2020 resolution provided for winding up, and winding up a company by its members requires a special resolution.
- Just and equitable: rejected. The petitioners were minority shareholders, and there was no deadlock in management.
The court then dismissed the petition under section 308(2), finding that there was another remedy available "which they are unreasonably refusing to pursue": selling their shares to the respondents. No order for costs appears in the judgment.
The reasoning
A private company is not wound up for being idle. The court read section 301(m) according to its terms: a year's suspension of business is a winding-up ground for listed companies only. In our reading the logic is that a listed company holds the public's money, while for a private company dormancy is a matter for its members unless some other ground is made out.
Oppression needs evidence, and the Act provides tools to find it. The petitioners' position was, in effect, "appoint a liquidator and he will find the money". The court pointed instead to the investigation machinery in the Act: under section 256 members holding not less than one-tenth of the voting power may apply to the Securities and Exchange Commission of Pakistan for an investigation; the inspector reports under section 262; the Commission may act on that report under section 268, including by seeking winding up; and the court itself may order an investigation under section 257. The petitioners had used none of these routes. Winding up was not to be granted as a substitute for evidence that could have been gathered first.
Selling assets is not ending the company. A decision to sell part of the factory and share the money is a decision about assets. In the court's words, it "does not by and in of itself reflect an intention to wind up the company", and in any event the sale had never happened. If the members truly want to dissolve the company, the Act requires a special resolution.
The just and equitable ground is narrow. Relying on the Lahore High Court's decision in Mian Waqar-ud-Din v. United Industries Limited, 2017 CLD 696, the court accepted that small private companies are sometimes treated like partnerships, so that deadlock or a justified loss of confidence in management can support winding up. But the dispute must be such that it becomes "virtually impossible to smoothly run the affairs" of the company, and a company is not to be wound up simply because a shareholder wants it to be. Here the petitioners were in the minority and there was no deadlock in management, so the threshold was not met.
The buy-out offer was decisive. Section 308(2) allows the court to refuse a winding-up order where the petitioners have another remedy and are acting unreasonably in not pursuing it. The petitioners said the company had no future; the respondents offered to buy their shares; and counsel could not say why the petitioners would not sell. On those facts, insisting on liquidation was unreasonable.
Read it alongside the SECP winding-up orders
The same court has recently wound up companies with very little discussion, which can give a misleading impression of how easy winding up is. In J.C.M. No. 22 of 2022 (22 December 2025), J.C.M. No. 25 of 2022 (26 January 2026) and J.C.M. No. 29 of 2022 (20 April 2026), petitions by the Additional Registrar of Companies through the SECP were allowed by short orders. The allegations included unlawful deposit-taking, activity outside the memorandum and, in the last case, years of failure to hold general meetings and file accounts and returns. In each, no one appeared for the company and the regulator's case stood unrebutted.
The contrast is the lesson. Where the regulator petitions on public-interest grounds and the company does not defend, winding up follows. Where shareholders fight among themselves, the court examines each ground closely and looks for an alternative to liquidation. Our page on corporate compliance and annual filings explains how to keep a dormant company out of the first category.
What it changes for Karachi businesses
- A dormant company is not automatically a dead one. Heirs who inherit shares in a non-trading private company cannot assume the court will liquidate it on request. If the family wants to end the company, the cleaner route is a special resolution for voluntary winding up, which needs agreement rather than litigation.
- Take a buy-out offer seriously. A minority shareholder who refuses an offer to buy their shares, without a reason they can explain to the court, risks having the petition dismissed under section 308(2). If the offer is too low, say so with a valuation and make a counter-proposal on the record.
- Build the evidence before alleging misappropriation. Use the members' right to inspect records, demand accounts, and, where the threshold of one-tenth of voting power is met, apply to the SECP for an investigation under section 256. Smaller holders may need to combine with other members to reach it.
- Write the exit into the documents. Most of this dispute would have been avoided by articles or a shareholders' agreement with a valuation mechanism and a put or call option on death or deadlock. Our guide to shareholder agreement essentials covers the clauses that matter.
- Separate asset decisions from corporate decisions. A board resolution to sell land, or a family iqrarnama about dividing proceeds, will not be read as consent to wind up the company. Record what is actually intended, in the form the Companies Act requires.
For disputes of this kind more broadly, see our corporate and commercial law practice page.
What remains open
- The oppression remedy under section 286. The respondents argued that section 286, which allows members to apply to the court about oppressive or prejudicial conduct, was the provision the petitioners should have used. The judgment does not analyse it. Whether the same facts, properly evidenced, would have justified relief there is untested.
- The price of the buy-out. The judgment records an offer to purchase but no price, valuation method or terms. It does not say whether refusing an offer at an unfair value would also be "unreasonable". In our view the reasoning depends on the offer being a genuine and fair exit, and a minority holder facing a low offer should document why it is inadequate.
- The maintainability objection. The respondents also argued non-compliance with section 304(e). The court did not decide that point, so it remains available in future petitions.
- Weight of authority. This is a single-bench decision of the Sindh High Court relying on a Lahore High Court authority. It is persuasive rather than binding on a Division Bench. At the time of writing we have not found a report of an appeal or a reported citation.
- Record inconsistencies. The judgment refers to the family undertaking by two different dates. Nothing in the outcome turns on the discrepancy, but anyone relying on the facts should check the record.
Citation
| Case | Judicial Companies Miscellaneous No. 19 of 2022, two minority shareholders v. M/s. Ideal Industries (Pvt.) Ltd. and others |
|---|---|
| Court | High Court of Sindh at Karachi (company jurisdiction, single bench) |
| Bench | Justice Ms. Saman Rafat Imtiaz |
| Heard / announced | 3 August 2026 / 9 September 2026 |
| Provisions | Companies Act, 2017, sections 256, 257, 262, 268, 301(g) and (m), 304, 305 and 308(2) |
| Authority relied on | Mian Waqar-ud-Din v. United Industries Limited, 2017 CLD 696 (Lahore High Court) |
| Result | Petition dismissed |
| Reported citation | None located at the time of writing |
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Official sources
- Sindh High Court, J.C.M. No. 19 of 2022, judgment announced 9 September 2026
- Sindh High Court, J.C.M. No. 29 of 2022, order dated 20 April 2026 (SECP winding-up petition)
- Sindh High Court, J.C.M. No. 25 of 2022, order dated 26 January 2026 (SECP winding-up petition)
- Sindh High Court, J.C.M. No. 22 of 2022, order dated 22 December 2025 (SECP winding-up petition)
- Securities and Exchange Commission of Pakistan: The Companies Act, 2017 (updated text)
Common questions
Can a private company in Pakistan be wound up because it has stopped doing business?
Not on that ground alone. The Sindh High Court held that suspension of business for a whole year is a winding-up ground under section 301(m) of the Companies Act, 2017 only for listed companies. A dormant private company needs some other ground, such as a genuine deadlock or proven oppression.
What does section 308(2) of the Companies Act, 2017 allow the court to do?
As applied in this case, it allows the court to refuse a winding-up order where the petitioners have another remedy available and are unreasonably refusing to pursue it. Here the other remedy was selling their shares to the majority, who had offered to buy them.
I own a minority stake and suspect the directors are taking company income. What should I do first?
Gather evidence before seeking winding up. The court pointed to the investigation route: members with at least one-tenth of the voting power can apply to the SECP under section 256, and the court can order an investigation under section 257. Allegations without documents were not enough in this case.
Is a family iqrarnama or a board resolution to sell property an agreement to wind up the company?
No. The court held that an agreement to sell assets and share the proceeds does not show an intention to wind up the company, and that a members' decision to wind up requires a special resolution.
When will the court treat a private company like a partnership and wind it up on just and equitable grounds?
Only where the dispute makes it virtually impossible to run the company's affairs, typically a deadlock in management or a justified loss of confidence in those running it. A shareholder's wish to exit, or ordinary family mistrust, is not enough.
Does this decision bind other courts?
It is a single-bench decision of the Sindh High Court. It is persuasive for other judges of that court and elsewhere but does not bind a Division Bench or other High Courts. No appeal or reported citation had been located at the time of writing.
This article is general information about Pakistani law and procedure, not legal advice for any specific matter. If this touches on something you're currently facing, get in touch and we'll advise on your facts directly.