Shareholders’ meeting: deadlock in the hereditary co-ownership of corporate equity interests

An entrepreneur may devote a lifetime to building and developing their business. When the time comes to plan succession, he decides to leave his shareholdings in the company to his children equally.

This choice may be motivated by a desire for fairness, to avoid disparities and preserve family harmony, but it is also driven by a desire for tax efficiency, since transferring corporate equity interests to descendants (and spouses) may be exempt from inheritance and gift tax, provided the transfer gives the heirs effective control of the company, which they maintain for at least five years.

Upon the entrepreneur’s death, the equity interests therefore fall into hereditary co-ownership. However, what appears to be a simple and equitable choice can have significant consequences.

The issue in such cases is not so much who inherits, but how the membership rights will be exercised, and how the company will be governed after the generational transition.

When co-ownership becomes an obstacle to governance

When several heirs jointly inherit a corporate equity interest, a hereditary co-ownership of the quota is formed. This is governed by Article 2468(5) of the Italian Civil Code, which stipulates that the co-owners must exercise their membership rights collectively.

This means that the co-heirs cannot exercise their membership rights individually (for example, voting rights at a shareholders’ meeting), but must appoint a joint representative to represent the co-ownership vis-à-vis the company.

The joint representative is not an administrator of the equity interest and cannot substitute their own will for that of the co-holders. As clarified by the Court of Venice in its order of 4 July 2025, the representative’s role is to act as an intermediary for the co-owners, ensuring that relations between the company and the co-owners are conducted properly and transparently. Essentially, the representative has derivative standing and must ascertain the will of the co-owners. At the shareholders’ meeting, they must cast the vote in accordance with the majorities prescribed by the co-ownership’s governing rules or by law.

The governance problems that may arise when heirs hold equal positions – for example, 50% each – and are unable to reach an agreement on either the identification of the joint representative or the exercise of voting rights are therefore self-evident.

When deadlock becomes a ground for dissolution

The risk is not confined to disputes among co-heirs; the conflict may result in genuine paralysis of the company. This is precisely what occurred in the case examined by the Court of Bologna in its order of 28 January 2026.

Following the death of their parents, four siblings became joint owners of 98% of the shares in a limited liability company (S.r.l.).

The conflict among the heirs made it impossible to appoint a joint representative or comply with the obligations set out in Article 2470 of the Italian Civil Code. Consequently, the shareholders’ meeting was unable to achieve the quorum necessary to adopt any resolution.

The court therefore declared that the shareholders’ meeting was unable to function and appointed a liquidator under Article 2487(2) of the Italian Civil Code. The court recognised that the heirs’ inertia or refusal to comply with their statutory obligations could lead to a deadlock that would not only affect the shareholders, but also the creditors and the company itself.

A similar deadlock situation may arise when, despite appointing a representative, the co-owners fail to agree on how to vote. It should be noted in this regard that the joint representative does not decide independently how to exercise the voting rights, but rather complies with the instructions given by the co-owners. When such instructions conflict, the representative must abstain from voting. If the representative exercises the voting rights contrary to the will of the co-owners, the adopted resolution is invalid and may be challenged.

In both cases, the outcome is the most radical possible: the dissolution and liquidation of the company.

Prevention is the real solution to succession deadlock

Naturally, co-ownership can be dissolved with the unanimous consent of the co-heirs, or through judicial partition. However, this process can be time-consuming and costly, which could further exacerbate the conflict. In any case, dissolution is only practical if the resulting equity interests allow for the formation of decision-making majorities once the partition has been completed; otherwise, managerial paralysis remains unresolved.

Therefore, the real solution does not lie in managing the deadlock, but in preventing it.

Entrepreneurs’ succession planning should not be limited to the equitable distribution of assets and tax efficiency. It should address the following questions: Who will govern the business? With what majorities? And through what decision-making mechanisms?

Providing for unequal shareholding structures, granting differentiated rights and defining exit or pre-emption clauses in the articles of association can mean the difference between business continuity and dissolution. Without a strategic vision, an apparently equitable distribution risks producing an ungovernable equilibrium, thereby turning the inheritance into an insoluble conflict.