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CS Executive · Setting Up of Business, Industrial and Labour Laws · Business Collaborations

Meera Pharma and Kestrel Labs sign a JV agreement to form a company. Which clause is most directly aimed at preventing a deadlock when the two equal shareholders cannot agree on a key decision?

A dispute-resolution and deadlock-breaking clause is the right choice. With equal shareholding neither party can outvote the other, so the agreement provides escalation, mediation, arbitration or a buy-sell option. Clauses on registered office, auditors or share face value do not address disagreement between equal partners.

  1. AA dispute-resolution and deadlock-breaking mechanism such as escalation to senior management, mediation or buy-sell optionCorrect
  2. BA clause fixing the registered office address
  3. CA clause naming the auditors for the first year
  4. DA clause on the face value of equity shares

Explanation

With equal holding, neither party can outvote the other, so JV agreements include deadlock-resolution provisions such as escalation, mediation, arbitration or a buy-sell (shotgun) option. The other clauses are routine administrative or capital terms and do not resolve disagreement.

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