If you go into business with a family member or friend and structure your venture as a limited company, on the face of it, becoming 50/50 shareholders in the business seems sensible. Like a newly married couple who never imagined divorce could be a possibility, you and your fellow shareholders would never believe it if someone told you that a future dispute could erupt between you that may threaten your business’s viability. Unfortunately, business relationships can and do break down.
Serious disagreements can result in a company being unable to deliver its strategy, service its clients, and bring it to the brink of insolvency. In such cases, it may be that one of you has to go. But how do you remove someone who owns half of your business?
How Much Control Does a 50/50 Shareholder Have?
As we have explained in our article on minority shareholder rights, the rights you have as a shareholder, including voting rights, depend on the percentage of shares you hold. The power to appoint and remove directors and approve final dividend payments requires a shareholding of 51% or more. So if the 50/50 shareholder you want to remove is also a director, which is commonly the case, you won’t have the power to remove them per se.
The first remedy you may try is to pass a Special Resolution to amend the Articles to allow you to remove your fellow director. However, you will quickly discover that as your co-director/shareholder has over 25% share in the company, they can block the Special Resolution.
Most shareholder decisions require 50% of the vote to pass. If you and your business partner are 50/50 shareholders and cannot agree on one or more fundamental issues, you may reach a deadlock. This is where real trouble begins, and your company’s viability is put at risk.
The Steps for Removing a 50/50 Shareholder
The following is the typical process to follow when looking to remove a 50/50 shareholder:
- Check the company Articles of Association, Shareholders’ Agreement, and if the shareholder is also a director, the Director’s Service Agreement.
These may have provisions for removing a shareholder/director and setting out an agreed process for resolving disputes. - If the Articles do not help and there is no Shareholders’ Agreement or Director’s Service Agreement in place, the next step is to consider non-court dispute resolution methods such as negotiation and/or mediation.
These are generally faster and cheaper than formal litigation. Also, they are designed to reach win/win solutions that allow you and the other shareholders to feel more in control and perhaps even smooth over some of the animosity between you. The most likely solution, if the deadlock cannot be broken, is to negotiate a buyout of the other shareholder’s shares. - If negotiation and/or mediation do not work, you may need to involve the Court. You can present a Just and Equitable Winding Up Petition to the Court and ask them to put the company into liquidation by making a Winding Up Order. Under the Insolvency Act 1986, the Court will examine the dispute to see if an alternative solution can be reached. This is especially the case if the company is profitable, as the Court will be reluctant to destroy it. For example, rather than wind up the company, the Court may order you to buy out the other party’s shares.
What are the Risks Associated With Removing a 50/50 Shareholder?
It is crucial to seek legal advice from an experienced company law solicitor before taking any steps to remove a 50/50 shareholder. The route is far from easy and is laced with potential legal claims.
For example, if the other shareholder is also a director or an employee of the company, you could easily find yourself dealing with an unfair dismissal claim if you try to remove them without following the correct process. The other party may also bring a competing petition under section 994 of the Companies Act 2006, if they believe:
- The affairs of the company are being, or have been, conducted in a manner that is unfairly prejudicial to the interests of members;
- An actual or proposed act or omission of the company is or would be so prejudicial.
A New Hurdle: ECCTA and Companies House ID verification
Filing the change to remove a 50% shareholder is no longer a frictionless option due to enhanced scrutiny and new verification rules at Companies House.
From 18 November 2025, reforms under the Economic Crime and Corporate Transparency Act 2023 (ECCTA) made identity verification mandatory for directors and people with significant control (PSCs).
Companies House now has powers to query information and, where ID requirements are not met, filings for director removal can be delayed or rejected.
In practical terms, the outcome is likely to depend on the individual being verified first and having a personal codes reference (PCR) linked to their role. If you also need to verify PSC information, you may need to provide the verified person’s code through the PSC process too.
The key takeaway is process risk: even before you get into the legal options for resolving a 50/50 split, company filings may now turn on verification status, correct codes, and whether Companies House raises questions about what has been submitted.
Derivative Claims
Another risk if you are a director of the company is that the other shareholder may bring a derivative claim under section 260 of the Companies Act. Section 260 allows any company shareholder to bring a claim against a director who has breached their statutory or common law duties. A derivative claim is brought on behalf of the company rather than the shareholder.
An application must be made to the Court for a derivative claim to be pursued. The Claimant needs to have a compelling case backed up by evidence, as the Court is alert to vexatious claims or those that are made without merit. Most derivative claims fail at this stage because the safeguard against ‘revenge proceedings’ is so tight. Nevertheless, having to defend the application is likely to cause you stress and incur legal costs.
How We Can Help
The best way to protect the interests of your organisation and your personal well-being and professional reputation when removing a 50/50 shareholder is to work with an experienced shareholder dispute solicitor. They will advise you on how to break the deadlock and help you manage the risks associated with the solutions available.
As experts in all corporate law matters, including removing shareholders and drafting Articles of Association and Shareholder Agreements. Contact us on 0300 303 2071 or send us an email for more information.
Information reviewed and updated 10th March 2026 | This article is not a substitute for specific legal advice. | Image by freepik
