Shareholder Agreement Deadlock Clause

Persistent shareholder conflicts can pose a threat to the good conduct of business and the sustainability of companies. This is especially true when it comes to two-person companies in which shareholders participate equally, especially because, in such situations, situations of deadlock or deadlock can appear as deadlocks, which threaten the company. An option to sell allow, in certain circumstances, a shareholder to require that his shares be purchased by another shareholder or by the company. This can be useful for minority shareholders who do not agree with large shareholders and wish to leave the company. The above clauses are just a few of the general solutions for deadlocks. In order to avoid or overcome the blockages, clauses have been developed in the practice of the U.S. contract to allow one shareholder to leave the company quickly, provided that the other shareholder takes his stake. There are pros and cons for each of the different deadlock mechanisms, as described above. Shareholders should think carefully about who should be included in their shareholders` pact and agree in advance, when drafting the shareholders` pact, how to resolve a status quo. The shareholder contract must clearly define what constitutes an impasse.

This is because some of the following clauses have serious consequences, so shareholders do not want deadlock mechanisms to be triggered too easily. First of all with regard to terminology: the term « Russian roulette clause » is usual, but not mandatory. Thus the clause was called a « Chinese clause » in the crucial case of the Nuremberg Oberlandesgericht. Nevertheless, the general term « Russian roulette clause » includes, in the general case law, clauses that attempt to resolve a shareholder dispute in two-person corporations by removing a shareholder according to the following principles: an auction clause allows the parties to the dispute to offer securities of the other party (s) with the party most entitled to buy the others. It is clear that it will be a checkbook fight and that he prefers the one with the biggest. This is a Dutch auction in which shareholders make sealed bids indicating the minimum price at which they would sell their shares. The shareholder with the highest price must buy the shares of others at the lowest price. This clause stipulates that all shareholders (or if the shareholders are themselves companies, their managers) must meet personally or electronically for a longer meeting in order to resolve the problem and reach an agreement that usually involves compromises. 15.3 Deadlock is not resolved within business days [20] When the matter is referred to the respective shareholders` presidents, each shareholder is entitled to send a notification (the communication on the deadlock resolution) to the other shareholder [within [60] working days following the presumed arrival of a deadlock in accordance with point 15.1], after which each shareholder is allowed to transmit a notification (notification of the deadlock resolution) to the other shareholder , as a result of which each shareholder is authorized to submit a notification (notification of the deadlock resolution) to the other shareholder within [20] working days from the date of notification of the decision to clear the company`s headquarters.

which sends to the secretary of the company (or, if there is no secretary, the board of directors) a sealed written offer under which the shareholder will propose unconditionally to acquire at the cash price per share all the shares of the other shareholder (but not only a few), payable after the conclusion of the acquisition and sale of the shares concerned, which are indicated in the offer.