The BCR Insolvency Blog

How Does Liquidation Work For 50/50 Shareholders?

Posted by Chris Knott on 28-Jun-2019 10:49:52

How Does Liquidation Work For 5050 Shareholders

When there is a dispute at the heart of a company, it can be confusing, traumatic, and difficult to resolve. One party wants to abandon ship, the other is desperate to continue.

If one director in a 50/50 shareholding wants to liquidate and the other does not, stalemate, tensions, and dark clouds quickly follow.

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However, dispute resolution can be achieved with experienced third-party mediation. Experienced business experts are skilled at taking a non-judgemental view and guiding the organisation towards a solution.


Deadlocked

There are many reasons why a dispute might end in a deadlock:

  • Disagreement about strategy
  • General unhappiness about working together
  • Mistrust
  • Miscommunication

When two equal directors reach this stage, there is nobody inside the company who can help. In a 50/50 partnership, a deadlock can mean stalemate.

Unfortunately, the result is usually that the business becomes overwhelmed. With attention drawn away from day-to-day matters, even very successful companies can find themselves struggling to perform.

When this type of deadlock occurs, it can be daunting to know what to do next.


Ask The Court

The director/shareholder who wishes to exit the business could apply for a winding up of the company, on ‘just and equitable’ grounds. Should the court agree to the winding up of the company, and the company is solvent, the company will enter members’ voluntary liquidation (MVL).

In the case of MVL, assets are distributed equally between the shareholders, and the company is closed. This means that the party that wishes to continue the company has the potential to do so if they still have access to the customer base.


Learn To Communicate

Deadlocks are often the result of catastrophic communication failures. These are difficult to resolve without professional help. However, different viewpoints can be brought onto the same page by an experienced third party.

Often, accurate communication can clear some of the blockages that are hindering the closure of the company.


Removing A Director

In the case of an acrimonious divorce, there are several options. Experts often advise buying out the other shareholder’s shares. When finances are available, this is normally a sensible option.

Many companies reaching this phase in their life cycle may not have this option.

This is where business advisers such as BCR can be extremely helpful. With over 25 years in the business, BCR have nursed many companies through unsettling divorce battles, and have the expertise to provide same-day consultation to kick-start the process.

 

Get Help

50/50 partnerships always have the potential to end in difficulty. There is nothing surprising or shameful about this. The important thing is to act. If you or your client is in need of professional advice, download our free guide. Or, if you are already sure that you are ready to move forwards, call us now on 0333 014 3454 for a free consultation and some peace of mind.

Image source: Pixabay

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