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Practice notes

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Published by a ³ÉÈËÓ°Òô Corporate expert

Practice notes
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A deadlock is where parties to an agreement have an irreconcilable conflict and are therefore unable to reach agreement. This term is often used in connection with corporate joint ventures (JVs), in particular 50:50 JVs where no single party has a controlling stake in the JV and therefore all decisions require unanimity. Deadlock scenarios can also arise in non-50:50 JVs, such as where certain decisions require unanimity or where there are more than two JV parties and the outcome of a vote results in no majority.

Certain disagreements can lead to deadlock stifling the joint venture company (JVC) from functioning properly. At the outset, it is prudent to consider the ways in which a deadlock could be resolved. Therefore, joint venture agreements (JVAs) typically contain deadlock resolution processes (which are often stepped) which need to be followed in order to resolve the deadlock situation. Setting out deadlock resolution processes in the JVA will save time and costs should a deadlock scenario arise and will also assist the parties to ensure the continuity of the JV.

Sometimes, the same issues that give rise to a

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Deadlock definition
What does Deadlock mean?

This is where the parties cannot reach agreement upon a particular matter which requires their approval. A joint venture company in which two shareholders each own 50% of the shares is known as a deadlocked or deadlock joint venture, as the shareholders need to reach agreement on all matters for a decision to be taken. A deadlock may also arise where the joint venture is not held 50/50 in relation to reserved matters which require the approval of all joint venture parties. Joint venture agreements will typically contain deadlock provisions for breaking a deadlock.

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