Voting rights are generally based on the holding of shares on a pro-rata basis. In a 100-share company, a shareholder of 50 shares may therefore exceed one of the other two shares, each holding 25 shares. However, the two minority shareholders can find themselves in a deadlock by voting together against the majority. In addition, in the event of an impasse, whether or not it has been abused, there is a risk of exploitation of the situation or the provisions of the shareholder contract or the statutes to the detriment of a shareholder. That is the case, for example. B, when a shareholder is aware of the other shareholder`s cash flow difficulties and uses them to acquire his shares at an advantageous price, for example. B by setting a purchase price (too) low for the acquisition of the stake. An exit clause may be required to remove a shareholder who is endangering the company. Such a clause would allow other shareholders to take control and buy the shares of the other party.

This clause is normally triggered when a shareholder becomes insolvent, but it could also be designed to be applied if a party retains the authorization that causes immobility. Today, climbing determination is a staple in the Deadlock toolbox. It tries to save relations and continue the joint venture by encouraging the parties to find a compromise. A good determination of escalation should therefore create a formal structure to facilitate amicable and constructive communication between the parties. Deadlock is an inherent risk in joint ventures, as all joint ventures have some kind of shared control (except in extreme scenarios where one or more investors are minority shareholders with a minor stake that does not justify them for any form of control). A joint venture is created when two or more commercial parties pool their resources to operate a joint venture. In return for its contributions, each party acquires a kind of control over the joint venture. If the joint venture is in the form of a company, the control can be positive (in terms of voting rights and board seats) or negative (in the form of veto rights). Regardless of the form of control, it is likely that no party would have full control over all the strategic and important aspects of the management of the joint venture. If control is used together, deadlocks are inevitable. In order to avoid disputes over whether or not the firing mechanism is involved, it is advisable to clearly define when there is a dead end and in what impasse a shooting mechanism should engage.

This may be the case, for example. B, in the event of a deadlock in the context of an essential, contractually defined, corporate governance issue. To determine what deadlock mechanisms are needed in a given shareholder pact, it is important to take into account the structure of the company and the dynamics of the shareholders. Almost all deadlock clauses can be manipulated by a shareholder with much greater financial means than other shareholders. It is therefore important to take into account, when drawing up a blocking clause, the relative dynamics of power between shareholders. This clause allows one of the shareholders to become chairman in the event of an impasse. The president has the vote and is empowered to make a decision, which effectively denies the concept of joint control. This clause is only appropriate if there are more than two shareholders. Of course, there are dead ends that reflect a fundamental difference in interest and vision that, even with the best determination of escalation, cannot be resolved.