When business partners reach an impasse, a provisional director steps in to break the deadlock.
It's not ideal—but when internal conflict threatens to paralyze or destroy a viable company, a neutral third party with legal authority is sometimes the only path to resolution.
A provisional director is a neutral third party appointed by a judge to resolve conflicts among the directors sitting on a corporate board. While provisional directors are generally considered a last resort, the role they play is extraordinarily valuable when a board conflict has become so entrenched that it threatens the health or survival of the business.
Provisional directors are brought in to remedy deadlocked boards and irreconcilable disputes between business partners. When the parties cannot agree on how to move forward — whether on day-to-day operations or long-term strategy — and all other attempts at resolution have failed, a court may step in and appoint a provisional director to break the deadlock.
Court-appointed provisional directors typically arise under two scenarios.
1. The first is when the conflict has rendered the business unable to function. If the dispute has reached a point where normal business operations can no longer be conducted effectively, or where there is a credible risk that the company's assets or operations will be damaged or lost as a result of the deadlock, a provisional director can be appointed to settle the dispute and get things back on track.
2. The second scenario occurs when a company's shareholders cannot successfully elect directors at their annual meeting. If two factions hold an equal number of shares and the vote is hopelessly split, shareholders with sufficient voting power may petition the court to appoint one or more provisional directors to resolve the impasse.
Provisional directors and receivers share some important similarities. Both are required to be impartial third parties with no financial interest in the outcome and no personal relationship with the parties involved. Neutrality is the foundation of both roles.
However, their responsibilities and authority differ significantly. A receiver generally holds broad powers — to make major decisions, sell assets, hire and fire contractors, manage finances, and take sweeping action to protect or rehabilitate a business or property. A provisional director, by contrast, operates strictly within the bounds of the corporate board. They hold no more and no less authority than any other director on the board, and their sole function is to cast a deciding vote or provide the impartial perspective needed to break a deadlock.
It's also worth noting that a provisional director's involvement can be quite brief — in some cases limited to a single board meeting — whereas a receivership assignment often spans several months or even years. For this reason, provisional directors tend to be a less costly and less disruptive intervention than a full receivership, making them an attractive option when the conflict is board-level and contained.
Whether you are a shareholder in a company facing an operational dispute, a board member anticipating a potential deadlock, or an attorney advising a client in either situation, understanding how provisional directors work — and when to request one — is essential preparation.
Griswold Receivers has extensive experience with provisional director appointments and can help you understand your options, navigate the appointment process, and know what to expect.