Two founders, 50-50 shares, an equal say. On incorporation day the arrangement looks like fairness itself: nobody can steamroll anybody, every decision is taken together. The trouble is that the same arrangement flips at the first serious disagreement — because nobody can steamroll anybody, no decision can be taken at all. Company lawyers call this famous impasse a deadlock, and in practice its most expensive examples appear precisely in equal partnerships built with the best of intentions.
The typical fuse is a growth decision: one founder wants to raise a round, the other argues for profitable growth. A proposal to replace the CTO hits the same wall; and when a sale of the company comes up, one side is for the exit while the other wants to keep going. Neither side needs to be wrong — a collision of two defensible visions paralyses a company just as thoroughly as a single bad decision.
Deadlock is largely a manageable risk, managed through drafting; the catch is that these clauses can only be written while the parties can still agree. Negotiating a deadlock clause after the fight has started is like haggling over an insurance policy during the fire.
Deadlock lives on two levels: shareholders and the board
In a 50-50 structure, the first level of deadlock is the general assembly: neither shareholder can reach a decision-making majority alone. Every matter reserved to the shareholders (capital increases, dividend decisions, amendments to the articles) needs two signatures. The second level is the board of directors: on boards of two or four members, built with an egalitarian reflex, a split vote means the proposal fails, and even day-to-day management decisions can hang in the air.
The cost of deadlock is not abstract. Budgets cannot be approved, the corporate approvals needed for a financing round cannot be produced, key hires cannot be appointed. For investors, an unresolvable founder conflict is a walk-away reason in itself; when due diligence reveals a 50-50 cap table with no deadlock clause, that is usually the first question asked. A deadlock is the slow-motion version of the founder break-ups that drag whole companies down with them.
Prevention is cheaper than cure: the contractual first line of defence
The first line of defence is built to stop deadlock arising at all, or to dissolve it quickly when it does. The tools that work in practice cluster under a few headings.
- A map of authority. A regime in which every decision needs unanimity is an invitation to deadlock; leaving daily operations to the CEO and management, and confining joint approval to a short list of genuinely critical matters, shrinks the surface of friction from the start.
- A neutral vote. Building the board with an odd number of seats and reserving one for an independent member chosen jointly by both sides breaks the symmetry structurally. Giving the chair a casting vote is, for Turkish joint-stock company boards, a contested technique; if that route is taken, the design must be legally vetted.
- An escalation ladder. A well-drafted deadlock clause moves the dispute first into structured negotiation between the founders and then into mediation, with clear steps and time limits. Under Turkish law, mediation is already a precondition to litigation for a large class of commercial claims; a voluntary mediation step written into the contract is the way to reach that stage before the dispute hardens into a war.
- An arbitration clause. For disputes that cannot be dissolved, institutional arbitration clauses (ISTAC or ICC) can move the process onto a faster and more confidential track than the state courts.
Shotgun, Texas shoot-out, Russian roulette: colourful names, harsh consequences
Once the preventive machinery is exhausted, the clauses that put a price on separation take over. In the classic shotgun (Russian roulette) arrangement, one party serves notice naming a price per share; the other must either sell at that price or buy at the same price. The elegance of the mechanism lies in price honesty: the party triggering it knows it may end up as buyer or seller at its own number, and is therefore forced to name a realistic one. In the Texas shoot-out variant both sides want to buy; sealed bids are submitted and the higher bidder takes the other side’s shares at its bid.
These clauses carry a serious side effect: asymmetry of financial firepower. The party with access to funding can trigger at a low price knowing full well the other side cannot act as buyer; on paper the mechanism is symmetric, in practice it runs one way. In negotiations we therefore recommend adding brakes to shotgun provisions — minimum standstill periods, independent valuation floors, or suspension while a financing round is in progress. These structures tie a call option and a put option to one another, and they only work as intended if the pricing and the process are built fairly.
Do these mechanisms survive under Turkish law?
Shotgun clauses and their relatives come from Anglo-American contract practice; under Turkish law they can, as a rule, be constructed as valid contractual obligations, but they do not transfer shares by themselves. A shareholders’ agreement binds its parties; whether it also reaches the company and third parties depends on being supported in the corporate documents. In practice we therefore recommend seating the mechanism on three legs: a detailed clause in the shareholders’ agreement, a contractual penalty that makes breach genuinely deterrent, and supporting tools that ease performance — undertakings to transfer shares, escrow arrangements where appropriate, and pre-prepared transfer documentation.
What can be carried into the articles of association must be designed separately and carefully: the mandatory rules of Turkish joint-stock company law do not allow every arrangement in the shareholders’ agreement to be lifted to the corporate level. In structures where the contractual layer and the corporate layer are drafted inconsistently, the two texts trip each other at the moment of crisis, and the deadlock-resolution mechanism produces a second deadlock of its own.
The last resort: dissolution for just cause
If the contract contains no mechanism, or the mechanism itself jams, the picture moves to court. Article 531 of the Turkish Commercial Code allows shareholders holding a certain proportion of the capital to ask the court for the company’s dissolution where just cause exists; a permanent, unresolvable deadlock is among the typical grounds advanced. The provision’s important flexibility is this: instead of dissolution, the court may order the claimant shareholder’s exit against payment of the real value of their shares, or another remedy suited to the situation. So although the claim looks like an action to shut the company down, in practice it very often ends as a court-imposed pricing of the separation.
A realistic picture of this route is necessary: the litigation is long, the outcome unpredictable, the company loses value throughout, and the dispute becomes a public fight. Dissolution for just cause is not part of deadlock planning; it is the price of its absence — and the real function of a good contractual mechanism is to make sure the parties never reach that door.
To sum up: a 50-50 partnership is a fairness decision taken at incorporation, but it needs a decision-making architecture to operate. Narrow the map of authority, break the symmetry with an independent vote or a clear escalation ladder, price the possibility of separation in advance through a shotgun-type mechanism, and support the design with corporate documents so that it is genuinely enforceable under Turkish law. None of this signals distrust between partners; on the contrary, the sturdiest partnerships are the ones that managed to discuss separation. A deadlock clause resembles a prenuptial agreement: with luck it is never used, but its mere existence makes it easier for both sides to stay at the table.
Sources. Turkish Commercial Code No. 6102 and Istanbul Arbitration Centre (ISTAC). Statute links open the official Turkish texts on mevzuat.gov.tr.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
Author
If this is on your desk
Templates and checklists are free in the Founder Academy; for a specific situation, book a 30-minute intro call.
Founder AcademyBook an intro call