The issues relating to a deadlock and a judicial dissolution can be properly managed through having a well-negotiated and executed operating agreement for companies and shareholders’ agreement for corporations in place. The members or shareholders of privately held business entities should consider agreeing on terms of a buy-sell arrangement. They should have tiebreaker voting terms to avoid any major disruptions with operations and management. They should have a less expensive and expeditious alternate dispute resolution mechanism to avoid the expense of costly litigation and have a good understanding amongst themselves as to how the business affairs will be handled if there is an event relating to death, divorce, and/or disability. If counsel is involved early on to assure that members and shareholders have a proper agreement in place with well thought out terms that cover the needs of the business and those who own it, then parties can effectively manage stressful legal events relating to a deadlock or a judicial dissolution or completely avoid such events.
- Overview of statutory provisions to avoid judicial dissolution;
- Right of first refusal and shotgun provisions and related buy-sell strategies;
- Importance of having appropriate tie-breaker provisions;
- Significance of forced mediation and arbitration provisions;
- Differences between put or call provisions;
- Need for death, divorce, and disability provisions and related considerations;
- Drastic remedy of partition or sale of company assets; and
- Need for court intervention and tips for selecting the right provisions.