In between the presentation of a winding up petition and making of a winding up order, a company entered into a settlement agreement with the Respondent, who founded the company and was previously a shareholder and director of the company.
The court considered whether the agreement was void, if so, whether the court should validate it and if it was valid, what claims against the respondent were barred. Having considered the terms of the agreement, the Judge concluded that the intended claims by the company’s liquidators were not barred by the agreement in any event.
The Judge did, however, go on to consider whether section 127 invalidated the agreement. Having considered the authorities, the Judge concluded that the release of contractual rights constituted a disposition as did a promise not to sue and therefore those provisions of the settlement agreement were void. The Judge also decided that, in the circumstances, he would not exercise his discretion and validate the agreement.