Deadlock between equal owners paralyses a company, and the remedies are limited
and blunt.
Statutory grounds. Director deadlock causing irreparable injury or
preventing the business from being conducted to advantage; shareholder deadlock
in electing directors for a period; and for LLCs, that it is not reasonably
practicable to carry on the business.
What courts prefer. Solutions that preserve the business. Appointment of a
provisional director or a custodian with authority to break ties; appointment of
a receiver; an ordered buyout where a statute permits an election; and a
court-supervised sale.
Dissolution where nothing else works, with a wind-down that usually destroys
going-concern value.
Not reasonably practicable is a narrower standard than oppression, and
courts have declined relief where a profitable business continued to operate
despite hostility between the members.
Evidence. Missed meetings, failed votes on necessary actions, unpaid
obligations, lost opportunities, employee departures, and the operational
consequences — not merely the personal animosity.
Strategy. These cases resolve in a buyout in the large majority of
instances, which means the valuation work should begin at the outset and the
litigation should be structured to reach that question quickly.
