ELT Recycling (NZ) Ltd (ELT) is a company in the business of scrap tyre collection and recycling. The shareholders of ELT had ongoing financial disputes with one of ELT's shareholders, Mr Adams, who was responsible for development of the intellectual property. Adams issued an invoice to ELT as remuneration for his services and when the other shareholders (the Zhang interests) refused to pay, Adams took steps to pass a 'resolution' to liquidate ELT and appoint Mr Imran Kamal as liquidator.

In this proceeding the Zhang interests sought leave to apply to for an order declaring Kamal's appointment as liquidator to be invalid. The question for the Court was whether the liquidation was lawfully commenced. Adams contended that Mr Zhang had abdicated his role as a director of ELT and as such, he had the legal right to assume control of ELT, issue shares, put ELT into voluntary administration, and use the new shares to pass a special resolution putting ELT into liquidation. The Court found there was no evidence that the Zhang interests were given notice of the resolution to appoint Kamal and in any event Adams did not have power to remove Mr Zhang as a director or to issue new shares. The Court found that Kamal was invalidly appointed and granted leave for the Zhang interests to apply for an order declaring Kamal's appointment as invalid under s 284(1)(g) of the Companies Act 1993. Heath J considered that given the lack of any prejudice to creditors, an order terminating the liquidation should be also be made under s 250. The Court discussed the need to exercise caution in the way in which it restores the company's affairs to the status quo that ought to have existed immediately before the invalid liquidation resolution was passed.

Mr Kamal has featured in an earlier update, in relation to an objection to his acting as liquidator, based on his various tax related criminal convictions.

See the full Court decision here.