When the owners of a company fall out, the constitution and any shareholder agreement decide most of what happens next, and where they are silent the Corporations Act fills the gap. Most disputes end in a negotiated buyout or a sale. If they do not, a court can order one owner to buy the other out or, as a last resort, wind the company up.
In this article
- Why does a falling out stop the company working?
- What do the constitution and any shareholder agreement say?
- Can I remove my co-owner or make them sell?
- What information is each owner entitled to?
- How do most deadlocks end?
- What can a court do if one owner is treated unfairly?
- When will a court wind the company up?
- How we help
- Common questions
Why does a falling out stop the company working?
Under the default rules in the Corporations Act 2001 (Cth), which apply unless a company's constitution replaces them, a resolution of the directors passes by a majority of the votes cast, and two directors are needed for a quorum unless the directors decide otherwise. In a company owned and run by two people with equal shares, neither can outvote the other, and a director who simply stops coming to meetings can leave the board without a quorum at all.
The default rules give the chair of a directors' meeting a casting vote, and the chair of a shareholders' meeting has one as well. Who holds the chair can therefore decide a tied vote, but the directors choose their chair between themselves, and a constitution can change or remove the casting vote altogether.
What do the constitution and any shareholder agreement say?
These two documents often contain the answer. A shareholder agreement may set out a deadlock procedure, a right for one owner to buy the other out at a price fixed by a valuer, what happens when an owner stops working in the business, and restraints on competing after an exit. Our guide to shareholder agreements explains how those clauses are drafted.
Where there is no agreement, the constitution and the default rules govern, and neither gives an owner a ready way out. Selling your half to an outsider is rarely practical either, because the default rules allow the directors of a proprietary company to refuse to register a transfer of shares for any reason, and few buyers want half of a company whose other owner is in dispute with them.
Can I remove my co-owner or make them sell?
Usually not on your own. Under the default rules a proprietary company can remove a director by a resolution of its shareholders, but with equal holdings that resolution passes only if a casting vote at the meeting breaks the tie. There is no general power to force a fellow shareholder to sell. An owner who stops working in the business still owns their shares and every right that comes with them.
The frustration of that position leads owners into steps that make it worse: locking the other owner out of the bank accounts or the premises, cutting off their access to the accounts, raising their own pay without a proper decision of the company, or moving customers and staff into a new company. Each of those can breach the duties every director owes the company, and each can become evidence in an oppression claim against the owner who took it. Our guide to directors' duties in Victoria sets out what those duties require.
In a dispute with your co-owner and unsure what you can do without making your position worse? Call (03) 9125 8355 or send an enquiry.
What information is each owner entitled to?
Most of these disputes come down to money, and the records show where it went. A director has a right of access to the company's financial records at all reasonable times. A director can also inspect the company's other books for the purposes of a legal proceeding they are a party to, propose in good faith to bring, or expect to be brought against them, and a former director keeps that right, including access to the financial records, for seven years after leaving the board.
A shareholder who is not a director can ask the court for an order to inspect the books, which it may make only if satisfied that the shareholder is acting in good faith and for a proper purpose.
How do most deadlocks end?
By agreement. Most end with one owner buying the other out, or with the business being sold and the proceeds divided, and a court becomes involved only when that fails. The points to settle are practical ones: what the shares are worth and how that is worked out, who keeps the business name, the clients and the staff, how loans between the owners and the company are repaid, and how the departing owner is released from personal guarantees given to the bank or the landlord. That last point is easily missed, and an owner who leaves without a release can remain personally liable for the debts of a business they no longer own.
Mediation helps because it puts both owners in a room with someone whose only task is to find a deal they can each accept. A buyout agreed early, while the business still trades well, can leave both owners with far more than a court process that spends the very value they are arguing over.
What can a court do if one owner is treated unfairly?
The Corporations Act gives a shareholder a remedy where the conduct of the company's affairs, an act or omission of the company, or a resolution of its shareholders is contrary to the interests of the members as a whole. The same remedy is available where any of those is oppressive to, unfairly prejudicial to, or unfairly discriminatory against a shareholder, whether in their capacity as a shareholder or in any other capacity. That last phrase matters in a small company, where the owners are usually its directors and employees too. Being shut out of management or the accounts, or watching profits leave through payments to the other owner, are typical complaints, although whether conduct reaches the standard is for the court to decide on the whole history.
If it does, the court can make any order it considers appropriate. The Act gives examples, among them an order that one shareholder buy the other's shares, an order regulating how the company is run from now on, a change to the constitution, an order restraining a person from doing something, the appointment of a receiver, and an order that the company be wound up. A buyout order is often what an applicant asks for, because it separates the owners and leaves the business standing. The Supreme Court of Victoria and the Federal Court can both hear these applications.
Where the company itself has a claim, for example against an owner who took its money or its customers, a shareholder or director can ask the court for leave to sue in the company's name. Leave depends on several matters, including that the company will probably not sue itself, that the applicant acts in good faith and that leave is in the company's best interests, and the applicant ordinarily gives the company at least 14 days' written notice first.
When will a court wind the company up?
The court can order that a company be wound up where it considers that just and equitable, and on related grounds such as the directors acting in their own interests rather than those of the shareholders as a whole, or in a way that appears unfair or unjust to other shareholders. A complete breakdown of trust between the only two owners of a business that depended on them working together is the kind of case in which these applications are made, and a shareholder holding fully paid shares is entitled to apply.
Winding up is a last resort, and the Act treats it as one. Where shareholders apply on the just and equitable ground, the court can decline to wind the company up if it considers that some other remedy is available to them and that they are acting unreasonably in seeking a winding up instead of pursuing it. If an order is made, a liquidator takes control, sells the business or its assets, pays the creditors and returns anything left to the shareholders. The business ends for both owners unless one of them buys it from the liquidator, which is often what brings owners back to negotiate.
How we help
Spencer Alexander Lawyers acts for business owners across Victoria in disputes with a co-owner, whether you want to leave the company or keep it. We read the constitution, any shareholder agreement and the company's records first, tell you plainly where you stand and what you can and cannot do without the other owner, and then work towards the exit that keeps the most value, whether that is a negotiated buyout, a sale, mediation or, where it is warranted, an application to the court. Learn more about our commercial law practice.
Common questions
My business partner has stopped working but still owns half the company. Can I take their shares?
Not without their agreement or a court order, unless the constitution or a shareholder agreement gives you a right to buy them in that situation. Owning shares does not depend on working in the business, so the starting point is the company's documents and then a negotiated buyout.
Can a court make my co-owner buy me out?
It can. Where the company's affairs are conducted oppressively or unfairly against a shareholder, the court can order another shareholder to buy their shares, among a range of other orders. Whether it will depends on the conduct proved.
Is winding up the company the only way out?
No, it is a last resort. Most disputes end in a buyout or a sale by agreement, and a court asked to wind up a company on the just and equitable ground can decline where another remedy is available and seeking a winding up is unreasonable.
Deadlocked with your co-owner, or worried about what they are doing with the company? Call (03) 9125 8355 or send an enquiry.
Sources: Corporations Act 2001 (Cth), sections 9, 58AA, 135, 198F, 203C, 232, 233, 234, 236, 237, 247A, 248E, 248F, 248G, 250E, 290, 461, 462, 467 and 1072G.
This guide reflects the law applying in Victoria as at October 2026. It is general information only, not legal advice, and does not take your circumstances into account.
