Shareholder Deadlock

When two 50/50 shareholders or LLC members disagree on how to manage their business in fundamental and irreconcilable ways, they are deadlocked. In that situation, both the Business Corporation Act and the Limited Liability Company Act allow one or both parties to seek court intervention.

When shareholders or members are deadlocked and the dispute is brought before the courts, courts have broad discretion under the applicable law to award or order the appropriate remedy for the circumstances. For example, a court might award one or more of the following remedies:

  • Set aside or alter an action taken by the company, shareholders, or directors;
  • Amend the company‚Äôs articles of organization, operating agreement, or bylaws;
  • Appoint a receiver, a director, an office, or other party to run the business;
  • Appoint a receiver, a director, an officer, or other party to break the deadlock;
  • Order an accounting;
  • Order one or the other party to buy the other out;
  • Order the sale or disposal of the business altogether;
  • Order the parties to submit the dispute to alternative dispute resolution;
  • Make such other order as the circumstances require.

For example, if one party has taken money improperly, the court might order that the party who has taken the money to repay it, or if one party has not contributed his or her required share for a pension, the court could order the equalization of contributors.

If you are currently involved in a shareholder deadlock, contact Thomas E. Patterson at (312)-223-1699 or tpatterson@pattersonlawfirm.com

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