In short
A shareholder cannot usually resign from ownership or make the other owners buy their shares simply because the relationship has broken down. The available route depends on the company’s constitution, any shareholder agreement, the financial position of the business and the conduct of the parties.
The first objective is to preserve the company’s value. The owners can then test a negotiated buyout, third-party sale, company buy-back, whole-business sale or orderly wind-down. Court remedies may be available where agreement is impossible or the conduct is unfair, but a court-ordered buyout is not automatic.
Can a shareholder simply leave the company?
No. You may be able to resign as a director or employee, but neither step disposes of your shares. A director cannot resign if that would leave the company without a director unless the company is being wound up. You remain a shareholder until the shares are validly transferred, bought back or otherwise dealt with.
A proposed buyer does not necessarily solve the problem. The constitution or shareholder agreement may give existing owners a first right to buy, require consent or set a transfer process. The Corporations Act also contains replaceable rules about registration and the ability of directors of a proprietary company to refuse a transfer. Those rules may have been changed by the constitution.
Start with the documents that control what can happen now. Look for transfer restrictions, pre-emptive rights, deadlock notices, compulsory-transfer events, valuation clauses, dispute-resolution steps and the voting rules that determine whether the company can still make decisions.
This is a targeted review, not a general exercise in rewriting the shareholder agreement. The immediate question is what the existing documents permit now.
Is the company genuinely deadlocked?
A serious disagreement is not always a legal deadlock. A 50/50 shareholding may still leave a functioning board, delegated managers or decisions that can be made by an ordinary resolution. Equally, the company may be operationally paralysed even if one owner can technically pass a particular resolution.
Check which decision is blocked, who has authority to make it, the minimum attendance needed for a valid meeting, whether anyone has a casting vote and whether the matter requires unanimous approval. The answer may differ for board decisions and shareholder decisions.
You should also keep your different roles separate. A dispute about employment, directorship or access to premises does not by itself determine who owns the shares or what they are worth.
What should the owners protect while they negotiate?
While you negotiate, protect the business you are both trying to keep or sell.
Current banking controls, payroll, tax, insurance, key contracts and customer commitments need attention. Company books and electronic records should be preserved. Directors must continue to act for the company and comply with their duties; company money, staff, confidential information and business opportunities should not be used as leverage in a personal ownership dispute.
A short standstill or operating protocol can help. It might identify decisions that may continue, decisions requiring joint approval, the information to be shared and a timetable for negotiation. If there are signs of insolvency, asset removal, client diversion or destruction of records, urgent legal advice may be needed instead of a gradual negotiation.
What exit outcomes can the owners consider?
Decide the commercial outcome first, because the structure and paperwork depend on who is buying, where the money comes from and whether the business will continue. Common possibilities include:
- one existing shareholder buys the other’s shares;
- a suitable third party buys the departing shareholder’s shares;
- the company undertakes a compliant share buy-back;
- the owners sell all shares, or the company sells the business, to an external buyer;
- the parties separate business activities or assets under an agreed restructure; or
- the business is wound down in an orderly way.
These choices are not interchangeable. For example, a company buy-back uses company funds and must satisfy creditor-protection and approval rules under the Corporations Act. A purchase by the remaining shareholder is a separate transaction with different funding, security and tax consequences.
A deal should also address shareholder loans, personal guarantees, security, director and employee roles, confidential information, restraints, releases, warranties and responsibility for costs. Selling the shares without releasing a departing owner’s guarantee can leave that person exposed after they have lost control of the business.
How is the departing shareholder’s interest valued?
There is no single automatic meaning of “fair value”. The governing documents may specify the valuer, valuation date, formula, assumptions and process for disputing the result. If they do, the clause may be binding even when one owner dislikes the outcome.
If there is no workable mechanism, the parties should agree the valuer’s instructions before the valuation begins. Those instructions may need to deal with maintainable earnings, debt and working capital, shareholder loans, contingent liabilities, owner remuneration, related-party arrangements, dependence on a particular person and the valuation date.
Whether a control premium or minority discount is relevant depends on the transaction, documents and legal remedy. It should not be assumed in advance.
Consider a two-owner consultancy in which one owner generates most new work while the other controls the financial records. A valuation based only on last year’s profit may miss the risk of client departure, unusual owner salaries and unpaid tax. Reliable financial information and agreed assumptions are essential before the percentage holding is converted into a price.
Can the owners resolve the dispute without court?
Often they can. A controlled process may include an exchange of current financial information, a jointly appointed valuer, written without-prejudice offers and mediation. “Without prejudice” is a legal label generally used for genuine settlement communications; it should not be added indiscriminately to ordinary company correspondence.
The negotiation needs a timetable. An open-ended process allows value to deteriorate and creates opportunities for further disputes about drawings, new contracts and access to information.
ASIC generally does not decide private disputes between proprietary-company shareholders. Its role as regulator should not be mistaken for a service that will set the price or direct one owner to buy the other out.
When might court action become necessary?
You may need court action if someone is withholding information, putting assets at risk, ignoring an agreed process or conducting the company’s affairs unfairly.
Under sections 232 and 233 of the Corporations Act 2001, the Court has broad powers where conduct is contrary to members’ interests as a whole or is oppressive, unfairly prejudicial or unfairly discriminatory. The possible orders include regulating the company’s future affairs or requiring shares to be purchased.
Ordinary disagreement or deadlock does not automatically establish oppression, and a buyout order is not guaranteed. The Court examines the actual conduct and circumstances.
In some cases, winding up on the “just and equitable” ground may also be raised. A court decides whether winding up is justified, and the process can destroy value: a liquidator takes control, creditors are paid first and shareholders receive only what remains. It is usually considered as a last-resort pathway, not a negotiating punishment.
What should you decide next?
Decide first whether the business should be preserved under one owner, sold as a whole or brought to an end. Then establish what the documents permit, what reliable information exists and how any interest will be valued and funded.
Early advice through our commercial disputes service can help you protect the company and choose the appropriate negotiation or court pathway. If the agreed outcome is a sale of the business rather than a share transfer, our business sale services address the transaction and completion process.
If a shareholder wants out or the owners can no longer make decisions together, contact Biz Lawyers & Advisory or call 1800 893 836 to discuss the company documents, valuation process and available pathways.
This article provides general information only. Shareholder rights and remedies depend on the company documents, financial position, conduct and individual circumstances, and you should obtain advice before taking action.
Primary sources
Law and guidance checked 20 August 2026.
