Disputes between company directors can arise for many reasons—whether due to strategic differences, a breakdown in personal relationships, or a business partnership that is no longer sustainable. When tensions escalate, one director may wish to liquidate the company, while the other may want to continue trading. In cases where both directors are 50/50 shareholders, resolving such disputes can be particularly complex.

When two directors each hold an equal share in a business and cannot reach an agreement, this results in deadlock. Without a shareholder agreement that provides a clear exit strategy, external intervention or legal measures may be required to resolve the situation.

One possible solution is a Members’ Voluntary Liquidation (MVL), which allows solvent companies to close in an orderly manner, ensuring surplus funds are fairly distributed among shareholders. This can be particularly beneficial in cases where former business partners wish to part ways amicably.

However, if one director refuses to consent to liquidation, alternative legal avenues may need to be pursued.

UK insolvency law provides for the winding-up of a company on just and equitable grounds, a mechanism designed to resolve director disputes where no other resolution is possible. This process hands the decision to the courts, which will determine whether liquidation is the most appropriate course of action.

While winding-up petitions on just and equitable grounds are rare, they may be considered when mutual trust and confidence between shareholders has irreparably broken down, preventing the business from functioning effectively. Courts will also assess whether a viable alternative—such as one director buying out the other—could serve as a more suitable resolution.

Rather than proceeding with liquidation, one shareholder may choose to sell their stake in the company. This is a common approach in cases such as divorce settlements, where one party exits the business while the other continues operations.

If an agreement cannot be reached, there are legal mechanisms available to remove a director from a limited company, though this process can be highly contentious and must be handled with expert guidance.
For directors who wish to start fresh, liquidation can provide the opportunity to establish a new company, retain existing clients, and move forward independently.

While winding-up petitions on just and equitable grounds are rare, they may be considered when mutual trust and confidence between shareholders has irreparably broken down, preventing the business from functioning effectively. Courts will also assess whether a viable alternative—such as one director buying out the other—could serve as a more suitable resolution.

Resolving director disputes requires careful consideration of both legal and financial implications. Whether exploring voluntary liquidation, negotiating a buyout, or seeking court intervention, obtaining professional advice at an early stage is essential.

At Coots & Boots, our experienced insolvency practitioners provide tailored guidance to directors facing business disputes. Contact us for a confidential consultation to explore your options and determine the best path forward.