To Liquidate or Not to Liquidate? | Push Digits Chartered Accountants

To Liquidate or Not to Liquidate?

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To Liquidate or Not to Liquidate?

Sometimes, due to extreme disputes between business owners, companies have to undergo liquidation. Even when there are documents such as shareholders’ agreement in place, it can be hard to liquidate a company in such a situation. This is when an MVL, or Members Voluntary Liquidation, is used to close down a solvent company. The MVL procedure sees a company shut down and distribute its funds between shareholders.

The MVL approach to liquidation is ideal for business partners who want to shut down their business due to reasons other than insolvency. But what if both owners hold 50% of the company’s shares and only one of them is willing to undergo liquidation?

Half & Half Shareholder Dispute Resolution

In a situation where two owners with an equal stake in a company cannot agree upon mutual liquidation, we get what is called a deadlock. In a deadlock situation, it can be hard to move forward without help from a third-party. With the help of a third-party, reasons for the liquidation process are presented at court, and if all goes well, the deadlock can be lifted.

Winding Up Petition

This petition is used for dealing with director disputes that are unsolvable through other means. In order to solve the problem, the matter is taken to court. The court analyzes the situation and decides whether the company is legible for voluntary liquidation or not.

It’s rare for winding up petitions to be filed on just and equitable grounds. The court proceeds by determining whether or not mutual confidence and trust have been broken down. The court will also explore options other than voluntary liquidation if any are appropriate.

Selling Shares and Director Removal in Limited Companies

The easiest option to pursue in this situation is that one party buys the other’s share in the company.

Once directors liquidate the company, they can open a new one and take any clients that they had along with them.

Director disputes can be complex and messy, making it hard to free yourself from your business. This is why it is recommended that you enlist the help of professionals who can guide you through the process.

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