Deadlock is the situation a 50/50 company is built to produce: two owners who cannot agree, no tiebreaker, and no mechanism to move. It paralyses the business and there is often no obvious way out.
How it presents
An evenly split board or membership that cannot approve a budget, appoint an officer, declare a distribution, or agree to sell. Sometimes it is one decision; more often the relationship has broken down and every decision is contested.
What the documents may already provide
Well-drafted agreements anticipate it:
- A casting vote or an odd-numbered independent director.
- Mediation or arbitration as a required first step.
- A buy-sell trigger on declared deadlock, often at a formula price.
- A shotgun clause — one owner names a price, the other chooses whether to buy or sell at it. Elegant, and heavily weighted toward whoever has the liquidity to buy.
Most small companies have none of these.
What courts can do
Where there is no contractual route, statutes in most states allow a court to intervene on deadlock — appointing a provisional director or custodian, ordering a buyout, or in the last resort dissolving the company. Dissolution is genuinely a last resort: it destroys going-concern value and usually leaves both sides worse off than a negotiated exit.
Practical guidance
Deadlock cases settle more often than they are decided, because the alternative is bad for everyone. The leverage sits with whoever can operate the business, fund the litigation, and wait. If that is not you, moving early matters more than being right.