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Mediation efforts floundered due to the confrontational attitude of the warring shareholders.The internal wrangling, mutual disillusionment and distrust, and the consequent breakdown of the relationship between the shareholders paralysed the company.This is because the deadlock and partnership analogy are broad in scope and, at the same time, they are the easiest categories to satisfy in terms of proof.for scenarios where in substance a partnership exists in the guise of company.In other words, the appellants' nominees and the respondents' nominees each had 50% of the vote at both board and management level.The shareholders appointed directors who vote in blocks in proportion to their shareholding.Apco was to refer clients' work required to be performed on the African continent to the company.
However, the evidence showed a justifiable breakdown of mutual trust and confidence between the shareholders regarding the conduct and management of the company's affairs.
The analogy to this could be found in the familiar questions which English and other Commonwealth courts have grappled with for decades. that will lead to a finding that it is just and equitable to wind up the company because of deadlock are: there are no other effective and appropriate remedies; there is an equal split or nearly equal split of shares and control; there is a serious and persistent disagreement as to some important questions respecting the management or functioning of the corporation; there is a resulting deadlock; and the deadlock paralyzes and seriously interferes with the normal operations of the corporation. The shareholder relationship was strained from the moment the respondents gave notice of their intention to extricate themselves from Nkonjane.
They could not do so because the provision in the shareholder agreement dealing with the disposal of shares required that all other shareholders consent thereto in writing.
The shareholder agreement could not provide a resolution to the stalemate as there was no deadlock breaking method such as the Texas Auction clause.
Clause 8.2 dealing with deadlock at board level excluded the inability to obtain the required vote at board meetings as a ground for winding up the company.