Q&As

How can one director/shareholder exit a private company without the cooperation of the other?

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Published on LexisPSL on 24/04/2015

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • How can one director/shareholder exit a private company without the cooperation of the other?
  • Resignation as a director
  • Shareholder exit
  • Share transfer
  • Share buyback
  • Third party buyer
  • Winding up

How can one director/shareholder exit a private company without the cooperation of the other?

This Q&A looks at some of the legal issues and considerations raised when a shareholder with 70% of the shares in a private limited company (Mr X) would like to leave the company against the wishes of the other, 30%, shareholder (Mr Y), where both shareholders are also the only directors of the company and where the situation is not covered in the company’s articles of association or any shareholders’ agreement. We cover:

  1. Mr X giving up office as a director, and

  2. possible exit options available to Mr X, both under the Companies Act 2006 (CA 2006) and otherwise

Resignation as a director

Neither the CA 2006 nor the model articles contain any specific provisions about how a director may resign. Subject to any specific provisions in the company's articles of association or any contract of employment, it is usual practice for a director to resign by way of a resignation letter addressed to the other directors of the company. See further: Appointment, retirement and resignation of a director—Resignation of a director.

For a sample director's resignation letter, see precedent: Letter—resignation from directorship.

In the absence of any special provisions to the contrary in the company’s articles of association or any shareholders agreement, Mr Y would have no right or power to refuse or

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