A company with two equal shareholders and one board seat each is structurally vulnerable to deadlock. When the shareholders disagree, neither can outvote the other, the board cannot function, and the company's operations stall. The NCLT has treated a complete managerial deadlock and irretrievable breakdown of trust between equal shareholders as a form of oppression that warrants a buy-out remedy.
The Urja Niyojan Order
In June 2026, the NCLT Mumbai directed a 50% shareholder of Urja Niyojan Pvt Ltd to transfer her entire shareholding at nil value, holding that a complete managerial deadlock and irretrievable breakdown of trust between equal shareholders had stalled the company's functioning. The Tribunal found that the respondent had opened an alternate bank account without authority, frozen the company's primary account, retained company funds, and absented herself from board meetings. The company's equity had been assessed at zero due to negative net worth, which is why the exit was ordered at nil value.
The order also required the respondent to cease to be a director within thirty days and to bear 50% of the costs of regularising pending statutory filings.
The Deadlock as Oppression
The NCLT's reasoning is that a deadlock that paralyses the company is oppressive to the shareholders, even where neither shareholder has a majority. The oppression is not the conduct of a majority against a minority; it is the conduct of one equal shareholder against the other, resulting in the company's inability to function. The buy-out is the remedy that breaks the deadlock by separating the shareholders.
The Valuation Question
The nil-value exit in Urja Niyojan was driven by the company's negative net worth. In a company with positive value, the buy-out would be at a valuation that reflects the company's worth. The Tribunal's task is to determine the fair value, and it may appoint a valuer if the parties cannot agree.
A 50:50 company that is heading towards deadlock should consider a shareholders' agreement with a deadlock resolution clause—a casting vote, a buy-sell mechanism, or a mediation requirement—before the deadlock crystallises into litigation.
Call to Action
Anuj Desai & Associates advises equal shareholders and 50:50 companies on deadlock resolution—from the negotiation of a shareholders' agreement to the NCLT buy-out remedy and the valuation process. If your company is facing a deadlock, we can help you evaluate the options.
📧 office@anujdesaiassociates.com
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