While stalemate clauses can get all sorts of interesting names, they all tend to boil down to one party`s request to sell its shares to others so that control changes and the remaining shareholders can vote on the issue. In fact, these are all kinds of conditional termination provisions. It may be provided that disputes or blockages are submitted to an independent third party. This can be an expert in the respective field, a mediator or an arbitrator. The theory behind offering several options is that agreeing on a small question (which solution method to choose) is enough to start conversations about the larger problem. For example, if there are several strong personalities, disagreements could be a way to assert their authority over others, rather than a real disagreement on the issue at stake. Instead of taking principles into account, emotions block decision-making. An impasse clause is a provision to resolve a situation where there is a major disagreement (or “impasse”) between shareholders, but neither party has a majority vote. that is, if 4 shareholders disagree on an issue and each hold 25% of the company`s shares. The shareholders` agreement must contain a clear definition of what constitutes an impasse. Indeed, some of the following clauses have serious consequences, so shareholders do not want deadlock mechanisms to be triggered too easily.

This clause is similar to the president`s clause in that it allows one of the shareholders to be allowed (for a certain period of time) to find and enter into contracts with a buyer for 100% of the company`s shares at the same price per share. If the designated shareholder fails to win a buyer, the power to find a buyer is transferred to another shareholder. This continues until all shareholders have had a chance to win a buyer. If no buyer can be found, another solution should be sought. A shareholders` agreement can be used to perhaps give a decisive vote to a third party (for example. B a trusted director who is not a shareholder) if there is otherwise an impasse, or perhaps to change voting rights in certain matters so that each shareholder has one vote regardless of proportional ownership. Asking the court to resolve a shareholder lock-in is the option of last resort. This usually results in either the court ordering an independent valuation of the shares (i.e. so that the other party can buy them) or the issuance of a liquidation order. In the case of two equal shareholders who cannot find a way forward, the invitation of a third shareholder ensures that a majority decision can be made. Shareholder agreements typically require shareholder approval for a number of issues.

This may require a special agreement or a super-majority of shareholders or directors. The decisions that require this special approval are the most important decisions that the company faces. Therefore, a shareholders` agreement must provide for what should happen if there is an impasse between shareholders or directors with respect to these decisions. There are a variety of blocking clauses that can be used, this article will describe and evaluate these options. Sometimes, an agreement can offer several options for resolving disputes and choosing which options to use for the particular situation. This is a Dutch auction where shareholders place sealed bids indicating the minimum price at which they would sell their shares. The shareholder with the highest price must buy the shares of others at the lowest price. Provision may be made for the escalations to be referred to the presidents or chief executive officers of the respective parties to the joint venture. Below, we present some common resolution mechanisms that can be used when the shareholders of the joint venture find themselves at an impasse.

They can be classified in two ways: A put option allows a shareholder to request the purchase of their shares by another shareholder or the company in certain circumstances. This can be useful for minority shareholders who cannot reach an agreement with the major shareholders and want to leave the company. A Russian roulette or “shootout” procedure establishes a series of events as “dead end” events that can trigger a “shootout.” In this case, Party A has the right to inform Party B that it wishes to sell its share in the joint venture to Party B at the price indicated by Party A. Party B must then choose to accept Part A`s offer or sell its own interest in the joint venture to Party A at the same price. If a shareholder wants to get out of the company and the company has the means to buy its shares, it can resolve the impasse. Alternatively, the other shareholder can buy them back. It is not uncommon for shareholders to disagree on how the company is managed and controlled, or on the direction and strategy the company takes. This clause obliges all shareholders to make a sealed offer to purchase the shares of the other shareholders. All offers are passed on to third parties, who must decide which offer is the most “fair”. The fairest offer is the one that must be accepted. This solution usually forces the exit of a certain number of shareholders and favors shareholders who are in a stronger financial situation. A status quo can occur in a variety of scenarios, such as.

B where no agreement can be reached on a particular issue after two management meetings, or where a budget is not approved within a certain period of time. Regardless of the method used as an impasse-breaking mechanism in a shareholders` agreement, it is important to define the impasse situations that trigger the procedure. This clause authorizes one of the shareholders to become chairman in the event of a blockage. The president has the decisive vote and the power to make a decision, thus denying the concept of joint control. This clause is only appropriate if there are more than two shareholders. In the absence of specific provisions in a company`s constitutional documents dealing with impasse scenarios, the most important recourse available to a shareholder would be to seek judicial redress. Given the practical difficulties and costs of obtaining court decisions, we generally recommend including deadlock resolution provisions in a company`s constitutional documents. To resolve an “impasse”, shareholders follow a procedure set out in their shareholders` agreement (the impasse clause). .