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Corporate and Commercial

Shareholders Dispute

Q. I am a 50/50 shareholder and director in a Company and my working relationship has broken down.  The other shareholder now wants to remove me as a director.  How can I stop him?

A. The first place to look would be any shareholder agreement that you have.  For the purposes of this answer I am assuming there is no shareholders agreement, in which case you should look at the Company’s articles of association for how a director can be removed.

The standard articles provided by the Companies Act say that there must be a resolution passed by more than 50% of the shareholders of the Company.  A copy of the resolution must be sent to all shareholders at least 28 days before any meeting where your removal is to be proposed.  As you both hold 50% of the shares, neither of you are able to remove the other as a director.

How to resolve your working relationship is a more complicated question, but could involve one of you selling to the other, the whole Company being sold or, if possible, the Company being spilt between you.

Andrew Heeler, partner

*This article was previously published in the Peterborough Telegraph

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