Shareholder deadlock

Where the board and shareholder base is split evenly the biggest issue to work around is that if the directors and shareholders are split 50:50 no decisions can be taken.  In cases where there is no shareholders agreement and standard articles which have not been modified this causes a range of problems.

The Companies Act is surprisingly deficient on regulation of shareholder deadlocks given that many small companies are deliberately set up with equal shares and 2 directors only.

Reasons to work with us to resolve a shareholder deadlock

We are specialist solicitors for the resolution of shareholder deadlocks in private companies.

• We have resolved a great many cases in our time.  We handle difficult personalities in stressful situations.  We deal with director/shareholders who are no longer contributing to the business for a variety of reasons.
• We have the experience of having acted for companies, directors and shareholders - we know the landscape and can handle the tax aspects along with the commercial aspects.  We assess proportionality.

Finally, but importantly, we are realistic.

Typical problem areas faced when there is a 50-50 deadlock

• 51% of shareholder votes are required to dismiss a director who does not leave voluntarily.  So, the board is in stalemate.
• 51% of shareholder vote are needed to approve many transactions such as a transfer of shares.  So, the shareholders are stuck.
• If the bank becomes aware of a shareholder dispute the bank can freeze the bank accounts.  This creates a host of problems.

How we help resolve shareholder deadlock

• Strategic Legal Advice - on rights and remedies under the Companies Act 2006, shareholder agreements, and articles of association.
• Review of Governance Documents - to identify mechanisms for resolving deadlock (e.g. casting votes, chair powers, buy-sell clauses).
• Implementation of Deadlock-Breaking Mechanisms - such as Russian roulette, Texas shoot-out, or independent third-party intervention.
• Advice on Unfair Prejudice Claims.
• Exit Strategy Planning - including structured buyouts, share transfers, or company sale.
• Emergency Legal Remedies - such as injunctions or court applications where deadlock threatens business continuity.
• Corporate Restructuring Advice - to realign ownership, control, or governance where deadlock is ongoing.
• Future-Proofing Governance - by updating constitutional documents to minimise risk of future stalemates.

Buy back and cancellation of shares

If the company has sufficient cash a company share buy back can be used to deal with the transfer of shares in any shareholder deadlock situation once sale and the price per share is agreed.

We are experienced in obtaining sensible outcomes in 50:50 shareholder disputes and have a proven track record in this area - get in touch to discuss how we can help.