Shareholder disputes can jeopardize the sustainability of companies, especially in the case of 50/50 joint ventures. Below is an overview of corporate law instruments to avoid or overcome the dreaded deadlocks. Often, the development of the deadlock provisions will depend to a large extent on what the parties want to reach consensus. A blockage can occur both within the board of directors and at the shareholder level. As a general rule, joint venture agreements provide that a deadlock has occurred when the board of directors or shareholders are unable, if necessary, to make a decision on a reserve matter. At the board level, this would mean either: (i) that the designated director of one of the joint venture partners did not vote in favour of such a reservation, or that the designated director of one of the partners of the joint venture abstained at successive board meetings (two or three); or (ii) in the event of successive board meetings, the quorum is absent. Similarly, a deadlock may occur at the shareholder level if (i) one of the joint venture partners does not vote in favour of a reserve decision; or (ii) such a partner of the joint venture, which abstained at successive general meetings (two or three); or (iii) no quorum at successive shareholder meetings. b) Texas Shoot-out: in a texas firing clause, each shareholder submits a sealed offer to an independent third party (e.g.B. public accountant of the joint venture) with a firm offer indicating the price at which that shareholder is willing to purchase the entire shareholding of the other shareholder in the joint venture. Both offers are then opened simultaneously, and depending on the shareholder offering the higher price, it is obligatory to buy the other at that price.
There is a tendency to provide a list of reserved cases, even in the case of a 50:50 JV. Therefore, even the slightest disagreement on a minor or less relevant issue can lead to a stalemate that could lead one or more business associates to withdraw from the joint venture. This should not be in the interests of the joint venture or its partners/shareholders. It is therefore advisable to reduce the list of cases reserved for the purposes of the impasse, so that differences of opinion on non-fundamental issues do not lead to blockages. Joint ventures, business expansion, approval of a business plan, investments beyond a threshold) that may affect the activities, growth prospects of the joint venture company and/or the objectives of the joint venture partners. In order to avoid disputes over whether or not the slaughter mechanism is involved, it is advisable to clearly define when there is a deadlock and the impasse in which a slaughter mechanism should be broken down.