Can a 50% shareholder liquidate a company?

Can I liquidate a company as a 50:50 shareholder?

As a 50:50 shareholder, it’s not simple to sell off the company without your business partner’s agreement. 

If there’s a deadlock where one wants to sell and the other doesn’t, mediation could help find a solution. If not, you might have to ask the courts to decide the company’s fate by filing a winding-up petition. 

 

Who Can Initiate Liquidation for a Limited Company?

A shareholder might wish to close their business for different reasons. Maybe they’re nearing retirement or have a new business idea. But what if there are only two shareholders, each owning 50% of the company?

Usually, the Articles of Association set out the steps for handling shareholder disagreements. However, when neither director/shareholder is ready to budge, resolving the situation becomes harder.

Normally, when both shareholders decide to close their solvent company, a Members’ Voluntary Liquidation (MVL) is carried out by a licensed insolvency practitioner (IP). This winds up the business smoothly, allowing both shareholders to move forward.

But what occurs if 50/50 shareholders don’t see eye to eye on liquidating the company?

 

50/50 shareholder arguments

When a company starts with two shareholders, it’s common to work on equal terms, each holding 50% of the shares. The business could thrive for years without any problems, but if a disagreement crops up, the equal share ownership, without anyone having a deciding vote, can lead to a tricky situation.

This problem can swiftly impact the business’s daily operations, as directors’ attention is diverted to the ongoing disagreement. This might result in issues like reduced sales and poorer customer service, leading to financial troubles even if the business was once very profitable.

 

Overcoming Shareholder Deadlock: Methods for Resolution

If a 50% shareholder aims to close the company, for any reason, it can lead to a deadlock that seems insurmountable. Without another shareholder’s deciding vote, a stalemate arises, often needing outside help to untangle.

Using independent mediation services can break this deadlock, allowing shareholders to see things more clearly. One shareholder might decide to step down, freeing the other to continue running the business.

But if external mediation fails, can one 50% shareholder shut down the company without the other’s consent?

 

Handing Over the Issue to the Court: Legal Action and Proceedings

A 50% shareholder can initiate the liquidation of a company by filing a winding-up petition in court based on ‘just and equitable’ grounds. The court then decides on the best course for the company, which may or may not involve liquidation.

These petitions offer a way to resolve such deadlocks, but the court also considers other potential actions aside from liquidation.

The court aims to determine if trust between the shareholders has completely eroded and explores other options. So, what alternatives to liquidation could break this deadlock?

One option could be for one party to buy out the other, provided they have the financial means to do so. This would allow the shareholder wishing to liquidate to move on, while the company continues under sole ownership.

 

Looking for Professional Support with Company Liquidation? Get Expert Assistance

Getting professional assistance is crucial if you’re in a disagreement with another shareholder, especially when you both own 50% of the company’s shares. Seeking help promptly can prevent a costly deadlock and safeguard the business from unnecessary financial setbacks.

Having a third party evaluate the situation, such as in the case of presenting a just and equitable winding-up petition, can shed light on the best path forward. Even if liquidation isn’t the outcome, seeking early assistance remains highly advantageous.

 

Read More:   

• Creditors’ Voluntary Liquidation process
• What actions can a liquidator take to recover company assets
• How do I liquidate my company process and procedure
• Can I buy back company assets during or after liquidation
• What is a Members’ Voluntary Liquidation

 

Reach Out to Vanguard Insolvency for Immediate Consultation Today

If you’re a 50% shareholder facing a dispute with your business partner, Vanguard Insolvency is here to assist you. We offer guidance on resolving the situation and can explain the process of liquidation through a just and equitable winding-up petition.

Contact our partner-led team for a free, same-day consultation. With offices across the UK, reliable professional assistance is always within reach.