Breaking Deadlock: The Advantages of Using a Chapter 7 Bankruptcy Trustee

As an Alternative to Seeking the Appointment of a State Court Receiver

Written by: Eric R. Perkins and Justin S. Baumgartner

In the event of a management deadlock among owners of a closely held entity with a limited number of shareholders, partners, or members, the non-operating owners often pursue a resolution of the parties’ management disputes through state court litigation. The simplest example of corporate deadlock involves a company with two co-owners who are equal (50–50) shareholders or members and can no longer agree on how to run or capitalize their business leading to major animosity and a lack of goodwill between the parties. In cases such as this, when the breakdown of the interest holders’ relationship is irreparable, an aggrieved shareholder or member who wants themself or their business partner(s) to exit the company, or to even wind up the company as a whole, may seek to accomplish his goals through the appointment of a state court receiver.[1] Read full artcle

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