Deadlock of directors, managers, shareholders or members of a corporation or LLC

Deadlock of directors, managers, shareholders or members of a corporation or LLC

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 irreparable injury is threatened to the business, or if the deadlock prevents the business from being conducted to the shared advantage of the shareholders, a dispute gives the courts broad discretion under the applicable law to order the appropriate remedy. 805 ILCS 5/12.55(a)(1), 5/12.56(a)(1); 805 ILCS 180/35-1(a)(4)(A). For example, a court might award one or more of the following remedies:

  • Set aside or alter an action taken by the company, shareholders, LLC members, directors, or managers;
  • Amend the company’s articles of organization, operating agreement, or bylaws;
  • Appoint a receiver, a director, an officer, 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 an arbitrator or mediator; or
  • 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 repay it, or if one party has not contributed his or her required share for a pension fund, the court could order the equalization of contributions.

 

To speak to one of our lawyers, get in touch with us at (312) 223-1699 or email Thomas E. Patterson at tpatterson@pattersonlawfirm.com for more advice and information.

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