75% of shareholders, by value of shares, must vote in favour to pass a 'special resolution for winding-up'.

Quick Summary

  • Shareholders vote on a special resolution for a voluntary winding-up of the company
  • 75% of shareholders (by value of shares) must agree to this special resolution

What happens if a company director feels a voluntary liquidation is right for the company but there is disagreements between directors and shareholders?

Differences of opinion between directors and shareholders of limited companies is not uncommon. Disputes happen in all walks of life and working relationships are no different.

If a business falls into financial disarray it is likely that fingers will be pointed towards other Directors to lay blame. This is a common problem as nobody really wants to accept responsibility of a business going downhill - why would anyone really? However, at some point a discussion will need to take place to plan a way forward and perhaps consider liquidating the business.

It the decision is made by the board of directors to place the company into voluntary liquidation, a meeting of shareholders is required to vote on the winding up.

Votes are represented by the amount owned by each shareholder, so in essence the more shares owned the more powerful the votes. In general, shareholders appoint the Directors to manage the business and hope that they do a successful job – but of course this isn’t always the case. Directors are quite often shareholders but not always. Shareholders may be family members or friends.

What is an Ordinary Resolution?

An ordinary resolution of the members (or of a class of members) of a company means a resolution that is passed by a simple majority.

A simple majority is passed with more than 50% of the votes.

For example, if a company has 5 shareholders, each with equal voting rights, then 3 of the 5 would be sufficient to pass a simple resolution. If a company only has 2 shareholders with equal voting rights, then both shareholders would need to vote in favour to pass the resolution.

What is an Special Resolution?

The Companies Act 2006 specifies that certain company decisions must be made via special resolutions. These include changing a company's name, reducing a company's share capital and winding up a company.

Such resolutions help to protect minority shareholders as 75% as they require 75% of the votes in favour for it to be passed.