Deadlocked Companies
When advising small businesses one of the most common problems I encounter is the deadlocked company. This is usually where 2 people (often friends, or husband and wife) form a company where they are equal shareholders and each of them is a director. When things are going well this is not an issue, but if there is a falling out or one of them simply wants to take the company in a different direction, because each of them has equal voting rights (either in a shareholders’ meeting or a board meeting) neither of them can get a decision passed unless the other agrees to it. In the absence of agreement the only way to resolve the issue is to go to court, which is eye wateringly expensive.
There are ways to avoid this situation happening and so it is important to take advice before forming a company where this is a possibility.
