When Shareholders Fall Out, Can They Take the Company Down With Them?

What happens when two shareholders fall out but the company is still doing fine?

One option is to take the fight to court and petition for liquidation. Yet that raises a harder question: when does a fight between shareholders become a crisis the company itself can no longer survive?

Two Kenyan High Court decisions, handed down less than a year apart, offer two very different answers.

At Motion Pictures Limited, an advertising and PR firm in Westlands, two equal shareholders ended up in a standoff so severe that staff salaries went unpaid even after a client had sent the money. One director refused to authorise payments unless the other agreed to buy out his shares. The company had money coming in, but its owners could no longer agree on how to use it.

When a bank mandate holds a company hostage

Motion Pictures was owned equally by Francis Gichaba Gachagua and John Francis Kariuki Theuri. Gachagua ran the business day to day, while Theuri's practical role had narrowed to serving as the company's second mandated bank signatory.

When their relationship deteriorated, that arrangement became an operational choke point. Theuri refused to authorise expenditures, including payroll, unless Gachagua agreed to buy his shares. At one point, the standoff put the company's relationship with Bosch, one of its marketing agency clients, at risk. Bosch had already sent the funds, but November 2019 salaries remained unpaid because the directors could not agree on the payment.

Gachagua petitioned the High Court for liquidation in February 2020. The court initially pointed the shareholders toward alternatives, including arbitration and the transfer of shares under the company's articles of association.

Those alternatives went nowhere. Neither shareholder bought the other out, and neither showed an appetite for continuing to run the business together.

When the matter finally returned for judgment on 28 November 2025, the court found that the relationship had become irreparable, effective collaboration was impossible and the alternatives identified earlier were no longer practical. It ordered Motion Pictures liquidated and appointed the Official Receiver to wind up its affairs.

Evidence before the court put the company's net assets at roughly KSh37.7 million. The business had value, but its equal owners could no longer govern it.

Another High Court case, decided months later, went the other way.

When the High Court refuses to pull the plug

Joan Catherine Wangui and Robert Gethenji incorporated RAK Limited together in 2012. They were equal business partners and also a couple. When their personal relationship collapsed, their working relationship followed it.

Wangui filed her petition in September 2025, alleging that Gethenji had excluded her from managing the company since July 2024, denying her access to information, assets and decision-making. She asked the High Court to liquidate RAK Limited under the "just and equitable" provisions of the Insolvency Act.

Gethenji opposed the petition, arguing that the dispute was essentially a personal breakup being turned into a company's death sentence.

There was a crucial difference from Motion Pictures: RAK Limited was solvent and had no liabilities.

The High Court dismissed the liquidation petition in August 2026. The judge accepted that the relationship between the shareholders had broken down, but found that this did not by itself establish that the company had become incapable of functioning.

Liquidation, the court held, is a remedy of last resort. Where other remedies can address a shareholder's grievance without bringing the company to an end, winding it up is not the appropriate answer.

A shareholder can have a serious grievance without the company itself being beyond rescue.

So where is the line?

Put RAK Limited and Motion Pictures side by side and the difference becomes clearer. Both involved equal shareholders whose relationships had broken down, and both involved petitions asking the High Court to wind up the company.

But the corporate problems were different. RAK was still operating, and the evidence did not establish that the dispute had made the company incapable of functioning. Motion Pictures had reached a much more serious governance deadlock. Its directors could not agree on basic company decisions, the impasse had affected employees and clients, and the alternatives available to them had failed.

The courts were therefore dealing with a question narrower than who was right:

Could the shareholder's problem be resolved without killing the company?

That creates an uncomfortable trade-off. Preserving a viable business protects employees, customers, investors and the value built inside the company. But when a shareholder is genuinely locked out, keeping the company alive can also leave that person fighting for years over governance, information, control or an exit.

Motion Pictures itself shows how long that fight can last. The liquidation petition was filed in February 2020, and the final order came in November 2025. For a company caught in a governance deadlock, five years is a long time to leave ownership and control unresolved.

Don't make the judge write your breakup agreement

For founders, this is where the cases become useful.

A startup can survive a bad quarter or the loss of a major client. What it rarely survives is two equal partners who refuse to speak.

That is why shareholder agreements matter most before there is a dispute. Founders can agree in advance on how deadlocks are escalated, whether disputes go to mediation or arbitration, how shares are valued when someone wants out, and which decisions require both shareholders to approve them.

For 50/50 ventures, agreements can also contain buy-sell mechanisms such as "shotgun" clauses. One shareholder names a price for the other's stake, and the other chooses whether to buy or sell at that price. The mechanism gives both sides an incentive to put a serious value on the company because either could end up buying or selling.

None of this guarantees that a founder dispute will be painless. It does mean the founders decide the rules while they can still negotiate with each other.

By the time they are refusing to speak, refusing to sign documents and asking a judge whether their company should live or die, those decisions become much harder to make.

The question Kenyan courts are still answering

The two rulings landed within roughly nine months of each other, reflecting the difficult balance courts face when shareholder conflict collides with the survival of a business.

Motion Pictures shows that liquidation remains available when a shareholder deadlock becomes so severe that the business itself can no longer function and other options have failed. RAK shows the other side: a serious shareholder dispute does not automatically justify destroying a solvent, functioning company.

That leaves a question for the next case:

When the people who own a company can no longer work together, when has the fight become bigger than the company itself?

Kenyan courts are beginning to give us an answer. The next ruling may tell us just how firm that line really is.