Shareholder deadlock can make it extremely difficult for a company to function. Where neither side can make decisions and the relationship between shareholders has broken down completely, just-and-equitable winding up may be considered as a possible remedy.
However, genuine deadlock does not mean that the court will automatically agree to wind the company up.
The recent High Court decision in APL Holdco Ltd v Apple Properties Ltd [2026] EWHC 2245 (Ch) illustrates why. The court accepted that there had been a complete breakdown in trust and confidence and that the company was functionally deadlocked. Nevertheless, it refused the winding-up petition.
The decision demonstrates that the court will look beyond the existence of shareholder deadlock. The conduct of the parties, responsibility for the breakdown and the availability of other remedies can all be important.
In simple terms, just-and-equitable winding up is a discretionary court remedy which may bring a company to an end where, considering all the circumstances, it would be just and equitable to do so.
Our guidance on shareholder deadlock explains the wider options where shareholders can no longer agree on the management or direction of a company.
What happened in APL Holdco v Apple Properties?
The dispute concerned Apple Properties Limited, an Isle of Man company which owned a portfolio of rented properties in London said to be worth more than £4 million.
- The beneficial ownership of the company was effectively divided equally between two sides of a family dispute.
- APL Holdco Limited petitioned the High Court seeking to have Apple Properties wound up on the just-and-equitable ground. It relied principally on a complete breakdown in trust and confidence and functional deadlock in the management of the company.
The court accepted that both existed.
However, that did not determine the petition.
The court examined the history of the dispute and concluded that conduct attributable to the petitioner had been the sole cause of the breakdown in trust and confidence and the resulting deadlock.
It also considered the petitioner’s failure to pursue an alternative remedy available in the Isle of Man.
The petition was therefore dismissed. The court concluded that, looking at the circumstances as a whole, it would not be just and equitable to wind the company up.
The full High Court judgment in APL Holdco Ltd v Apple Properties Ltd [2026] EWHC 2245 (Ch) provides the detailed factual background and reasoning.
There is an important jurisdictional distinction. Apple Properties was incorporated in the Isle of Man and the English proceedings concerned the court’s jurisdiction to wind up an unregistered company under section 221 of the Insolvency Act 1986. The case was therefore not procedurally identical to an ordinary just-and-equitable winding-up petition involving a company registered in England and Wales.
Nevertheless, the judgment considers established principles concerning deadlock, breakdown of trust and confidence, equitable conduct and alternative remedies which are relevant when shareholder disputes arise in England and Wales.
When can shareholder deadlock justify just-and-equitable winding up?
Shareholder deadlock can, in appropriate circumstances, support a petition to wind up a company.
This may arise particularly in a company where ownership and management are divided equally and the shareholders can no longer reach the decisions required for the business to operate effectively.
Deadlock may affect decisions about funding, management appointments, dividends, business strategy, the sale of assets or the future direction of the company.
Where there is no mechanism in a shareholders’ agreement or the company’s articles for resolving the impasse, the dispute can become increasingly difficult to manage.
Just-and-equitable winding up can sometimes provide a remedy. However, it is a significant step because the ultimate result is the liquidation of the company rather than simply the resolution of the disagreement between shareholders.
Our dedicated guidance on just-and-equitable winding up explains the circumstances in which the remedy may be considered.
The court has a discretion. It is not enough simply to identify disagreement and ask the court to bring the company to an end.
The relationship between the shareholders, the nature of the company, the way it has historically been managed and the circumstances which created the deadlock may all be relevant.
That is particularly important in smaller owner-managed companies where shareholders may also be directors and where the commercial relationship may have been based on personal trust and an expectation of participation in management.
Why might the court refuse to wind up a deadlocked company?
APL Holdco demonstrates that the court may examine responsibility for the deadlock rather than treating the existence of deadlock as the end of the enquiry.
The court found that conduct attributable to the petitioner had caused the breakdown and functional deadlock upon which the petition itself depended.
That created a fundamental difficulty.
Just-and-equitable winding up is an equitable remedy. The court can therefore consider whether it would actually be fair to grant relief to the party seeking it.
The judgment discussed the equitable principle often described as the requirement to come to court with “clean hands”. In practical terms, this means that a shareholder may encounter difficulty asking the court to remedy a situation which that shareholder’s own conduct has created.
That does not mean a shareholder seeking winding up must have behaved perfectly throughout a dispute.
Shareholder disagreements are frequently contentious and criticism may exist on both sides. What made APL Holdco significant was the court’s much stronger conclusion about responsibility for the breakdown relied upon in support of the petition.
The availability of another reasonable remedy can also matter.
The court considered that the petitioner had unreasonably failed to pursue an alternative remedy available in the Isle of Man. This formed part of the overall reason why winding up was refused.
For shareholders in England and Wales, the practical point is that winding up should not normally be considered in isolation. Other remedies may offer a more proportionate way of resolving the dispute while preserving the underlying value of the business.
This is one reason why understanding the full range of shareholder dispute options before commencing proceedings can be important.
What alternatives are available to shareholders instead of winding up?
The appropriate remedy will depend heavily on what has happened and what the shareholder is trying to achieve.
In some disputes, a shareholder may argue that the company’s affairs have been conducted in a way which is unfairly prejudicial to their interests as a member.
An unfair prejudice claim can provide more flexible remedies than winding up. Depending on the circumstances, the court may make orders dealing with the ownership of shares rather than bringing the company itself to an end.
For example, the commercial outcome sought by one or both sides may ultimately be a buy-out.
That can sometimes preserve a viable business while separating shareholders whose relationship has become unworkable.
Negotiation or mediation may also provide a route to an agreed exit before the costs and disruption of substantial court proceedings become disproportionate to the dispute.
The company’s constitutional documents should also be checked carefully. A shareholders’ agreement or articles of association may contain deadlock procedures, transfer provisions or mechanisms which affect the available options.
It is therefore important to identify the commercial objective before deciding on the remedy.
A shareholder who ultimately wants to leave the business with fair value for their shares may require a very different strategy from a shareholder who wants to remain involved in the company and prevent particular conduct.
Similarly, a solvent and profitable company may contain significant value which would potentially be damaged by liquidation. That can make remedies which preserve the business more commercially attractive.
The existence of shareholder deadlock is therefore the start of the analysis rather than the conclusion.
What should shareholders do when a company becomes deadlocked?
The first priority is to understand precisely what decisions can no longer be made and what effect that is having on the company.
The articles of association, shareholders’ agreement and relevant board and shareholder records should be reviewed to establish how decisions are supposed to be taken and whether any contractual deadlock mechanism exists.
The history of the dispute is also important.
As APL Holdco demonstrates, the court may examine how the deadlock arose and the conduct of the shareholder seeking relief. Correspondence, board minutes, shareholder resolutions and records of negotiations may therefore become significant evidence.
Shareholders should also consider their actual commercial objective before beginning proceedings.
If the aim is to separate the shareholders, a negotiated purchase or sale of shares may be preferable to an application which risks bringing the company to an end.
If the complaint concerns the conduct of the majority or those controlling the company, an unfair prejudice claim may require consideration.
If there is genuine paralysis and no realistic alternative, just-and-equitable winding up may remain available in an appropriate case.
The important point from APL Holdco is that even serious shareholder deadlock does not guarantee that winding up will be ordered.
The court will consider the position more broadly, including the cause of the breakdown, the conduct of those seeking equitable relief and whether another remedy could realistically address the dispute.
For directors and shareholders facing an escalating disagreement, considering those issues early can help avoid taking a procedural route which does not achieve the underlying commercial objective.
Our shareholder dispute solicitors advise on deadlock, unfair prejudice claims, shareholder exits and applications for just-and-equitable winding up where business relationships have broken down.
