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Mexican shoot out meaning
Published by a LexisNexis Corporate expert
What does Mexican shoot out mean?
A Mexican shoot out is a contractual buy–sell mechanism used in shareholders’ agreements and joint venture agreements to resolve shareholder deadlock or force an exit. It is not defined in legislation or case law; the term is a descriptive label and drafting varies.
Typically, each party submits a sealed offer stating the price at which it is willing to sell its shares. The offers are opened simultaneously and, in the common variant, the party naming the lower sale price is required to sell its stake to the other at that price. It is a variant of the Texas shoot out (where sealed bids are usually to buy and the higher bid buys), and some agreements adapt the mechanics, so the governing document should be read carefully.
Key features include: sealed bids, a compulsory transfer at the determined price, strict timetables, funding and completion provisions, and interaction with pre-emption rights and transfer restrictions. The clause aims to create price discovery and break impasses but can favour the better-funded party.
Usage and enforceability are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, subject to general company law, financial assistance rules, consent requirements and stamp duty. See also Texas shoot out and...
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View the related Checklists about Mexican shoot out
CHECKLISTS
UK outsourcing agreements: comprehensive legal, regulatory and practical drafting and review checklist for lawyers
The Texas shoot out Either shareholder may commence the Texas shoot out—also called a Mexican shoot out, Tex Mex shoot out or sealed bids—by giving notice to the other shareholder; the shareholder who did not cause the deadlock may equally do so, with both shareholders then obliged to submit sealed bids for the other’s shares within a specified timescale period accordingly...
20 May
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View the related Flowcharts about Mexican shoot out
FLOWCHARTS
Choosing the right B2B supply of goods precedent: flowchart and matrix of drafting assumptions (bias, supply model, compliance, data, exclusivity, forecasts, consignment, drop ship, international, T&Cs)
The Texas shoot out Also termed a Mexican shoot out, Tex Mex shoot out or sealed bids, this procedure can be initiated by either shareholder, including shareholder who did not cause the deadlock, by serving notice on the other shareholder, compelling both shareholders to submit sealed bids for other shareholder’s shares within a specified timescale as set...
20 May
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PRACTICE NOTES
Deadlock in UK corporate joint ventures: triggers, reserved matters, and resolution mechanisms (escalation, ADR/expert determination, buy-sell options, share transfers, and termination via liquidation or winding up)
A deadlock arises when parties to an agreement face an irreconcilable dispute and cannot reach consensus. The expression is commonly associated with corporate joint ventures (JVs), especially 50:50 JVs where neither side holds a controlling interest and, as a result, unanimous consent is required for all decisions. Deadlock may equally occur in non-50:50 JVs, for example where specific matters demand unanimity or where more than two JV participants vote and no majority is achieved. Certain conflicts can trigger a deadlock that prevents the joint venture company (JVC) from operating effectively. It is sensible to address at the outset how a deadlock might be settled. Consequently, joint venture agreements (JVAs) usually include deadlock resolution mechanisms (often in stepped stages) that must be followed to resolve the impasse. Defining deadlock procedures within the JVA will save time and expense if a deadlock emerges and will help the parties to maintain the JV's continuity. On occasion, the very circumstances that produce a deadlock can also prompt the aggrieved party to seek relief under...
21 May
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PRACTICE NOTES
Planning for and resolving deadlock in 50/50 corporate joint ventures: triggers, governance and dispute resolution tools, and exit mechanisms (Russian roulette, Texas/Mexican shoot-out, sale, liquidation)
Where two partners in a joint venture each hold an equal 50% stake in the share capital of the joint venture company (JVC), that arrangement is commonly referred to as a deadlock, or deadlocked, joint venture. Under this structure, both parties must consent to any and all decisions to be taken by the JVC; where they fail to agree on a proposed course of action, no action is implemented and the status quo is preserved. When will deadlock be an issue?...
21 May
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