Do you own 50/50 shares in a company with another party?

We recently had an enquiry from a client who is a 50% shareholder, director and employee with her business partner in a company. Although the relationship was good when the company was formed two years ago, it has since turned acrimonious, both parties have separate goals and aspirations for the business and are not on speaking terms.

In the absence of a shareholders agreement, our client is stuck or “deadlocked,” meaning the company cannot progress decisions of the shareholders as they hold 50/50 ownership. We advised her she could take lengthy court action to force the other shareholder out or to try and liquidate the company. Alternatively, she could set up another company and resign from the existing one. All options are costly, time consuming and could have disastrous consequences on her business. 

Had there been a properly drafted shareholder’s agreement from the outset this would have covered the deadlock situation and other important factors, meaning less costs and headache for each party. We advise all our clients who are setting up a 50/50 business not to leave it too late, limit your exposure to risk by getting the right legal documents at the beginning. 

If you jointly own a business and would like to draft or review your shareholders agreement please contact Lawson-West Commercial Solicitor David Heys on 0116 212 1000.