Two equal owners. Two equally strong negotiating parties. Both refuse to budge. That's a deadlock — and without a mechanism to resolve it, it can block both decisions and deals for a long time.
Short answer: Deadlock arises when two (or more) parties with equal decision-making power fundamentally disagree, and neither can force a decision through alone. It's most commonly seen between two 50/50 owners, or between a founder and an investor with veto rights over key decisions.
Why does deadlock most often arise?
- Two owners with equal ownership shares and opposing visions for the business's future
- A founder and an investor who disagree on when the business should be sold
- Missing — or unclear — agreement on what happens when the parties can't agree
How is deadlock prevented before it arises?
The best solution is to prevent it in a shareholders' agreement (currently in Danish) before the disagreement even arises. Common mechanisms include:
- Russian roulette / shotgun clause — one party offers to buy the other out at a specific price, and the counterparty can either accept or buy at the same price themselves
- Independent mediation or arbitration — an appointed third party makes the final decision
- Forced sale — if the parties can't agree within a given deadline, the business is put up for sale
What do you do if there's no agreed mechanism?
Without a pre-agreed solution, a deadlock often ends in a prolonged and expensive conflict — in the worst case a lawsuit that paralyzes the business while it's ongoing. Here, mediation is often the fastest and cheapest route to a solution, rather than arbitration or litigation.
The most important thing to remember
A deadlock mechanism is one of those clauses you hope you never need — but which makes a huge difference the day you do. Make sure it's in place long before a specific disagreement arises.
30