Shareholder Disputes – Deadlock!

Have you ever heard of a deadlock situation between shareholders or business partners?

Do you own a business with your best friend or family member and have no formal terms in place?

Do you have Terms and Conditions in place covering your business?

Do you have a Shareholders Agreement in place?

Do you have bespoke Articles of Association to specifically deal with your business and how its run?   

I am sure some of you will go through those questions and think they may not be relevant, however every limited liability company that owns shares and provides goods or services to customers should have these documents in place. They are documents which govern how your company is run and if you don’t have them issues can arise.

That is what we are here for. To assist with ensuring you are adequately protected and can feel combatable running your business on a day to day basis without worrying a customer is going to complain or that one of you is going to retire and you do not know how to move forward.

If you provide goods or services and do not have a formal set of Terms and Conditions in place, this could really assist you if a problem arises with a customer or the quality of those goods etc. They limit your company’s liability and ensure you are adequately protected in ways you may never think about – late delivery, title and risk, another Covid-19 outbreak? Do not leave it until you have a problem occur to put these procedures in place.

A deadlock position will occur when shareholders of a corporation or parties to an agreement have an irreconcilable conflict (an argument in which neither party can agree and you have no way of moving forward). This term is often used in connection with 50:50 companies where neither shareholder has a majority interest, and a conflict arises over the management of the corporation, exit or sale of shares. If you have a shareholders agreement in place, this should cover what happens if parties cannot ultimately agree how to move forward. If you do not, you are at a deadlock and there are very little ways in moving forward.

Negotiation and mediation will usually then come into play and will cost additional money and put additional pressure on the parties. If you own a business and do not have these simple contracts in place, please get in contact with our Commercial Solicitor, Courtney Stephenson on 01384 811811, who can assist with ensuring you are protected moving forward. If you do have contracts in place, but would like them reviewed, Courtney can also assist with this and would be happy to have a look at them.