Many businesses operate as 50/50 partnerships. This means that both business partners have an equal ownership stake in the company, and they make joint decisions involving the business.
This arrangement can be extremely beneficial. Nonetheless, a 50/50 business partnership can be problematic when partners disagree on an issue. They may reach a deadlock and may not be able to move forward. How can a situation like this be resolved?
Mediation
One option that 50/50 owners have is mediation. This is an informal process that involves a neutral mediator who will help encourage open and honest discussions. Ideally, with the help of a mediator, each owner will be able to settle the dispute and find a solution to the deadlock. In mediation, business partners should still seek legal guidance.
A tie-breaking vote
In some cases, the owners may appoint a trusted third-party to cast a deciding vote on the issue in deadlock. For this method to work, impartiality is very important. The deadlock is unlikely to be broken if one owner thinks the third-party has based their decision on personal preference rather than the best interests of the company. Again, having legal guidance can help ensure that impartiality is respected.
Arbitration
Arbitration is a bit more formal than mediation but not quite as formal as the courtroom. The decision-making process is also different. Unlike mediation, where the mediator encourages owners to reach a decision, in arbitration, the final decision lies with the arbitrator.
The arbitrator will hear both sides of the story and come to a legally binding agreement that resolves the deadlock. To present sound arguments, each side should have as much legal information as possible.
Sometimes, a deadlock has to be resolved through litigation. When a dispute cannot be resolved, then dissolution of the partnership may be the only viable option.
We help 50/50 business partners who find themselves in a deadlock. Feel free to reach out to us for a consultation.