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Corporate Provisional Directors

Corporate litigation and disputes can often lead to unintended consequences. Section 351.323, RSMo discusses a scenario in which the court may appoint a third-party provisional director of a corporation when there is an (a) even number of directors who are equally divided so that business can no longer be conducted and/or (b) when there is danger that its property and business will be impaired and lost. Separately, there is  relief that can be afforded when there is corporate gridlock, including the outright dissolution and winding down of the business. If a provisional director is appointed, the Court must appoint an (1) impartial person, (2) who is a non-shareholder or creditor of the corporation, and is (3) unrelated to any of the other directors or officers of the corporation. Once appointed, the provisional directors has the rights and powers of a director. If the corporation cannot reach an agreement for his compensation, then the court may order the rates and/or amounts of compensation.

Not all provisional directors work out, though. In such situations, the court is required to remove a provisional if a certain number of directors or shareholders make the request to the court. This obviously addresses the potential concern to the existing directors and shareholders if someone completely unsuitable is appointed as provisional director. 

When evaluating claims and defenses made in the corporate litigation context, it is important to remember that this is a potential avenue for either you or the other party when the corporation is in a gridlock. Depending on the circumstances of a given case, this may be a desirable or undesirable alternative. Contact with questions regarding corporate litigation, shareholder rights, and business litigation generally.