Default Statutory Rules Governing Equal Joint Venture Voting Impasses
Statutory default rules resolve equal joint venture voting impasses through negative preservation, status quo lock, custodianship, and court liquidation.
Judicial Buyout Order
Meaning
Legal remedies in shareholder litigation sometimes involve a court mandating that one party purchase the shares of another. This directive, called a judicial buyout order, is typically used to resolve minority oppression disputes without liquidating an active business. It applies when the court determines that the corporate relationship is irretrievably broken.
Valuation Standard
Determining the price of the shares requires an objective assessment by independent financial experts. In a judicial buyout order, the court establishes the fair value of the minority shareholding on a specific valuation date. This value usually excludes any discount for lack of marketability or minority status, ensuring the departing shareholder receives a fair price.
The valuation protects the minority from being forced out at a distressed rate.
Procedural Directive
The court specifies the timeline and payment terms for the transaction. If the purchasing party cannot pay the full amount immediately, the judicial buyout order can arrange for structured payments secured by corporate assets. Interest is often added to the unpaid balance.
This directive ensures the buyout is completed.
Minority Exit
Achieving a clean separation is the primary outcome of the court’s intervention. The exiting shareholder receives cash and relinquishes all claims and directorships. This allows the remaining shareholders to run the business.