Shareholders agreement with deadlock provisions

A deadlock is two shareholders with equal power disagreeing about something the company cannot avoid deciding, and without an agreement the only resolution the law provides is a petition to wind the company up. Deadlock provisions give the shareholders a ladder: a definition of what counts, a cooling-off period and mediation, a mechanism that produces a decision or a buy-out, and winding up only when everything else has failed. The mechanism has to be one both shareholders would use, which is why it is chosen while they can still agree. I draft the agreement, with a briefing session and a note on how it fits the articles, for a fixed fee of £995, delivered in five working days.

Who this is for

Companies in England and Wales owned fifty-fifty or in any split where shareholders can block each other, including two-family companies and joint ventures, who want a route through a deadlock agreed before one happens.

What matters in deadlock provisions

What counts as a deadlock

The agreement should define a deadlock narrowly: a matter requiring a decision of the board or the shareholders that has been proposed at two meetings held a stated period apart and has not been resolved, and that one shareholder notifies as a deadlock in writing; a definition that catches every disagreement invites a shareholder to trigger a buy-out over a trivial matter, and one that is too narrow leaves the company stuck. The agreement should also say which matters cannot be deadlocks (routine decisions delegated to management) and which are fundamental enough to justify the mechanism.

Escalation before anyone pulls a trigger

The provisions should require a cooling-off period, a meeting of the principals without advisers, referral to a named mediator or a mediation body, and a stated period for the process, before any buy-out or winding-up mechanism can be used; most deadlocks are resolved at this stage, and a mechanism that can be triggered on the first disagreement is used as a threat rather than a resolution. The company should continue to be run on its existing budget and business plan during the process, with no new commitments outside the ordinary course.

A casting vote and an independent director

For operational deadlocks the agreement can give one shareholder's director a casting vote on defined matters, or appoint an independent director or chair whose vote breaks ties, with the independent's appointment and removal requiring both shareholders and their remit defined; a casting vote on everything makes one shareholder the controller, and an independent on everything makes an outsider the controller, so the agreement should say which matters each covers and leave the fundamental matters to the buy-out mechanism. An independent director owes the duties under the Companies Act 2006 and should be paid and insured for the role.

Buy-out mechanisms and how they work

For a deadlock that cannot be resolved, the agreement can provide a buy-out: one shareholder offers to buy the other's shares at a price, and the other must either sell at that price or buy the offeror's shares at the same price per share (a shotgun or Russian roulette clause); or each shareholder submits a sealed bid and the higher bidder buys at their price (a Texas shoot-out); or a valuation by an independent accountant with one shareholder having the first right to buy. The mechanism should be chosen for the shareholders' circumstances, because a shotgun clause favours the shareholder with more money, and a valuation favours the one who wants to stay.

Winding up as the last resort

Where no buy-out completes, the agreement should provide for the shareholders to resolve to wind the company up voluntarily, with the business sold as a going concern if possible and the proceeds distributed, which is what a court would order on a petition on the just and equitable ground under section 122 of the Insolvency Act 1986 in any event, but faster and without the costs; the provisions should say that each shareholder will vote for the resolution, because a shareholder who refuses leaves the other to petition.

Keeping the company running while the deadlock is resolved

The agreement should provide that during a deadlock the directors continue to manage the company within the approved budget, that neither shareholder may remove the other's director, that payments to shareholders continue on the existing basis, that customers and staff are not told unless the shareholders agree, and that the shareholders maintain confidentiality; it should also say what happens to the shareholders' loans, guarantees and the company's banking during the process, and the note on the articles addresses the transfer provisions the buy-out needs under section 33 of the Companies Act 2006.

What it costs

Shareholders agreement, £995. An agreement between the shareholders of a private company, with a note on how it interacts with your articles. Five working days.

Buying online forms the engagement on payment. The scope is what the shareholders agreement page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A briefing session with all shareholders together, to work through the questions people avoid asking each other
• A shareholders agreement drafted for your actual situation rather than a precedent with the names changed
• A note on how the agreement interacts with your articles, and whether the articles need amending to make it work
• A plain English explanation of every material choice, so nobody signs something they have not understood
• One round of amendments
• Signature-ready documents

What is not included

• Acting for individual shareholders separately, because I act for you jointly
• Company valuation
• Tax structuring, which needs your accountant and should run alongside this
• Amended articles of association and IP assignments, which I quote separately
• Filing at Companies House
• Resolving a dispute that has already started

Questions I am often asked

We are fifty-fifty and have deadlocked. There is no agreement. What are our options?

Agreement between you, mediation, one buying the other out by negotiation, or a petition to wind the company up on the just and equitable ground, which is slow and public. A deadlock agreement signed now, even after the disagreement started, gives you a better route if both of you will sign it.

Which buy-out mechanism should we choose?

The one you would both be willing to trigger. A shotgun clause suits two shareholders of similar means; a valuation mechanism suits one who wants to stay and one who may want to go. The briefing session is where it is chosen.

Can the deadlock clause be used to force me out?

Only if the definition lets a shareholder trigger it on a disagreement that is not a real deadlock, which the agreement is drafted to prevent with a narrow definition and an escalation process first.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Shareholders agreement for two founders with equal shares
• Shareholders agreement for a joint venture company

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.