A growing number of private limited companies are formed today. The distribution of shares in a corporation can be done in different ways. The most common one is that the most suitable shareholders, for the future development of the company, have a majority in the company in order to govern and control the company and its affairs. In a company with a solid majority decisions are fairly easy to make and there are seldom disputes, in terms of such decision-making.
But in today's legal arena companies are formed where shares are divided evenly between the partners. This is done to spread the control of the company between several shareholders. But what happens when a company of two people, or groups of equally strong shareholders, can not agree within the general meeting for a decision on who will be appointed as the Chairman, or in the case of important issues concerning the company's affairs.
One such company whose shares are scattered among the shareholders is generally called a 50/50 company. The company is not regulated in the Swedish Companies Act which makes it difficult to determine how certain decisions will be resolved when there are disagreements. What is regulated in the legislation for limited companies is very generally applied, which is why agreements and contracts are often used as a complement and an instrument to combat locked situations in smaller companies, especially in the 50/50 company. Contracts are made to complement the law and statutes. There are many types of contracts which can be conducted between the shareholders however; this essay will deal only with the shareholders and consortium agreements/contracts.
When a small company, such as the 50/50 company, with few shareholders does not sign agreements or contracts between them in order to fully regulate the situations and problems that may arise, the results can be devastating. When shareholders can not agree on decisions in the general meeting it may pertain to two specific decisions. One is the decision which must be taken when appointing the Board to prevent that there is a draw of lots, which is certainly not the optimal way of decision-making for a company. The second decision is the one pertaining to other important issues which must be decided in the general meeting, and where the Chairman’s casting vote will decide the outcome if the shareholders can not agree. It is there important to examine which possibilities exist for 50/50 companies to remedy a locked situation and maintain an optimal decision-making process.