When a solvent business is placed into liquidation by its shareholders it’s often because the directors want to retire, or perhaps due to the business having no further purpose. The process used is called Members’ Voluntary Liquidation (MVL), and it ensures the company closes down in an orderly manner.
If there are only two equal shareholders, however, and they don’t agree on whether the company should be liquidated, the situation is more complex. It may be difficult to resolve without taking positive action, so can a 50-50 shareholder put a company into liquidation without the agreement of the other person?
50-50 shareholder disputes and company liquidation
When there are only two shareholders, the lack of a casting vote can be problematic should a conflict arise. This type of shareholder dispute creates a deadlock that can continue for some time, with the risk of it affecting company performance as the directors become distracted
Typically, a company’s Articles of Association determine the way in which shareholder disputes are dealt with, but the 50-50 split means that neither shareholder has to concede to the other’s point of view.
There is a way that a 50-50 shareholder can put a company into liquidation, however, so how do they do this and what might be the outcome?
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A 50% shareholder can place their company into liquidation by applying to the courts for a winding up petition on ‘just and equitable’ grounds. They present a just and equitable winding up petition and the court decides the company’s fate.
The court will expect the shareholders to have undergone mediation in the first instance. In some cases the support of a professional mediation service can release a deadlock by presenting a clearer picture of the options available to the two shareholders.
Mediation doesn’t always work in a 50-50 shareholder deadlock, but a just and equitable winding up petition can provide a way out of the dispute, and allow the company and its directors to move forward.
Concerned about National Living Wage and NI increases?
With the rates of both National Living Wage and employer National Insurance Contributions increasing in recent years, this additional cost of employing staff has added more pressure onto already squeezed cash flows. If you are worried about the impact this is having on your company's finances, talk to the experts at UK Liquidators. As licensed insolvency practitioners we can explain your options and help you plot a way forward. Call today on 0808 253 9878.
What is a just and equitable winding up petition?
A winding up petition is commonly issued by a creditor intent on forcing the company into liquidation. The winding up petition leads to a winding up order, which sets in motion the liquidation process.
A just and equitable winding up petition is another means by which a company can be liquidated, but for different reasons. The court will look at the case, the background to the dispute, and whether the deadlock can be broken by any other means.
They may suggest the shareholder who doesn’t want to liquidate buys out their partner’s share, for example. If they’re financially able to do so, this could enable a profitable company to carry on trading, and provide the other shareholder with the opportunity to develop the business to its full potential.
Start your online liquidation today
If you have decided liquidation is the right option for your limited company, you can take the first step and begin the process online using our online portal. Starting the process is quick, simple, and can be done at a time that suits you. Your information will be submitted to your local UK Liquidators insolvency practitioner who will be with you every step of the way. Click here to start your company’s liquidation online.
When to seek professional assistance with a 50-50 shareholder dispute
It’s important to seek professional help early on in a 50-50 shareholder dispute. A deadlock of this kind can seriously disrupt the day-to-day operations of a company, demotivate staff, and negatively affect customer service levels.
Ultimately, profit levels will also suffer and a previously thriving company can quickly start to experience financial distress. Obtaining professional advice can help both shareholders move on, and end a stressful and damaging situation.
UK Liquidators has extensive experience of helping directors and shareholders deal with disputes and find ways to escape this problematic situation. Please contact one of our partner-led team for more information, and to arrange a free, same-day consultation. We work from a wide network of offices based around the country.
Jonathan Munnery
Insolvency & Restructuring Expert | 20+ Years Insolvency Experience
Jonathan is a Partner at Real Business Rescue and member of both the Insolvency Practitioners Association (MIPA) and The Association of Business Recovery Professionals (MABRP). Jonathan has over 20 years’ experience guiding directors through CVL and MVL processes, helping them understand their options and navigate financial distress with clarity and compassion.
IPA Member MABRP Member IPA Regulated
“ Directors often wait too long before seeking advice. The earlier you call, the more options remain available to you — and the better the outcome for everyone involved. ”
Jonathan is a Partner at Real Business Rescue and member of both the Insolvency Practitioners Association (MIPA) and The Association of Business Recovery Professionals (MABRP). Jonathan has over 20 years’ experience guiding directors through CVL and MVL processes, helping them understand their options and navigate financial distress with clarity and compassion.
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