The Provisional Director

August 31, 2012

In many cases, deadlocked and disputing equal shareholders turn to the courts for dispute resolution and assistance. In three different cases (2001-2003) we have been appointed and approved by the court and shareholders to serve as a Provisional Director pursuant to CCC Sections 2001 and 204. In fact, it has been our experience to date that this process is “better” than a 3rd-party receivership or the stalemate that has resulted from the shareholder dispute / differences in opinion.

In each of our appointments, we were interviewed by the shareholders and then approved by the Court. Though the initial suggestion of our appointment came from the court, in our opinion it was important to involve the shareholders and have them confirm our involvement. By design and statute, a provisional director only votes when the shareholder's deadlock.

Our experiences have resulted in some observations and opinions: 

Each shareholder, at one time or other, will be “upset” with our tie-breaking vote.
Progress toward resolution and effective interim operations result.
After a while, creative solutions and compromise occur.

As a provisional director, it has been our experience that we are first asked to resolve job duties, responsibilities, and related fair market compensation. Concurrent, we often address the “issues” each party has with the other. After issue resolution and some management and reporting structure has been implemented, operations actually improve. More important, employee morale and corporate atmosphere improve as shareholders work through the Board towards resolution.

Our executive and valuation skills are particularly relevant to the corporate governance process and integral to the often pending or threatened CCC Sec 2000 appraisal process. In each instance, we have been asked to expand our role and assist in deal-making settlement discussions. Our knowledge of the various tax, structuring, GAAP accounting and related standard and customary deal terms has been assisting to the parties and counsel. 

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