Two co-founders. Equal shares. Equal stubbornness. One wants to sell the business; the other doesn't. One thinks the company is worth $2 million; the other says $800,000. Nobody moves. The business bleeds while the argument drags on. There's a clause designed specifically for this moment and most people have never heard of it.
It's called a shotgun clause, and it's one of the most powerful tools in a shareholder agreement.
Here's how it works. Partner A names a price for the whole company and hands it to Partner B in writing. Partner B now has one choice: buy Partner A out at that price or sell their own shares to Partner A at that same price. B can't negotiate. B can't stall. The clause forces a clean resolution because whichever side pulls the trigger has to live with the number they set so they're incentivized to name a fair one. If you lowball it, the other side buys you out cheap. If you overprice it, you're buying them out at a premium. The math keeps everyone honest.
This is a deadlock-breaker. Shotgun clauses are almost always triggered when co-owners reach an impasse they can't resolve any other way such as a dispute over direction, valuation, or simply an irreparable breakdown in the relationship. Courts won't run your business for you, and waiting for a judge to break a deadlock is expensive and slow. The shotgun clause handles it privately, quickly, and without litigation.
Where it gets dangerous. The mechanism is elegant, but the traps are real. First, timing: Partner B typically has a fixed window (often 30 days) to decide whether to buy or sell. If they don't have financing lined up, they may be forced into a sale they never wanted, at a price they didn't set. Second, information asymmetry: whichever partner has a better read on the company's true value (often the one running day-to-day operations) holds a structural advantage. Third, liquidity: if neither party can actually fund the purchase, the clause jams rather than resolves. Well-drafted agreements address all three, setting realistic response windows, specifying how value is calculated, and sometimes requiring a third-party appraisal before the trigger is pulled.
Your move. If you have a 50/50 partnership (or any structure where deadlocks are possible) ask your lawyer whether a shotgun clause belongs in your shareholder agreement, and what guardrails make sense for your situation. The clause is only as useful as the conditions around it.
A loaded clause with no safety is still dangerous.
General information, not legal advice. Talk to a lawyer about your specific situation.
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