Scenario: the JV agreement says the general director is appointed by mutual agreement. For a year, each side has vetoed the other’s candidate — the company runs on an “acting” GD with limited authority, and banks are getting nervous. A year-long appointment deadlock is a governance crisis, not a HR problem.
Why it festers
Mutual-agreement appointment clauses feel fair at signing and paralyze at the first disagreement — each side fears the other’s candidate will capture the company. Meanwhile the “acting” GD can’t sign major contracts, approve capex, or give banks comfort — operational damage compounds monthly. The deadlock article’s mechanisms apply here, but CEO deadlocks deserve dedicated drafting.
Solutions, in escalating order
1) Agree the profile first: nationality/language, industry experience, reporting lines — most vetoes are about unstated criteria; writing them down dissolves half the deadlock. 2) Independent search: a jointly-instructed executive search firm produces a shortlist both sides pre-commit to choose from — process legitimacy breaks veto psychology. 3) Rotation or split roles: rotate the GD seat every 2–3 years, or split GD/Deputy GD between the parties with defined authority matrices. 4) Tie-breaker: after X failed rounds, an independent expert picks from the shortlist, or the chairman’s casting vote decides (where the charter allows). 5) Escalate to buy-sell: a CEO deadlock lasting beyond the defined period triggers the JV’s general deadlock mechanism — the ultimate incentive to agree.
Keeping the company alive meanwhile
Give the acting GD written interim authority sufficient for daily operations and banking — a members’ council resolution defining exact signing limits. Without it, every significant act is challengeable, and counterparties walk away. Document that the interim arrangement is without prejudice to the appointment dispute.
FAQs
1. Can one side appoint unilaterally after a year?
Only if the agreements allow it — otherwise the appointment is challengeable. Don’t create a second dispute solving the first.
2. Acting GD signs a major contract — valid?
Within their written interim authority — yes. Beyond it — voidable. Define the limits in writing.
3. Banks freeze facilities over the deadlock?
They can tighten terms — another reason to resolve fast and to give the acting GD bank-acceptable authority.
4. Vetoing every candidate — abuse?
Systematic bad-faith vetoing can evidence oppression/breach of the JV agreement’s good-faith duties — document the pattern.
5. Best prevention at formation?
A nomination-and-selection procedure in the JV agreement: profile, search firm, shortlist, rounds, then tie-breaker — with deadlines at each step.
This article has been quality-reviewed by the FLAW AI Legal Council
