Often on private equity investments, the parties agree to step-in rights or swamping rights. These are a contractual mechanism (usually also contained in the constitution of the company) allowing one party to "step in" and take voting control of the board of directors and/or general meetings of shareholders. For example, see Standard document, Articles of association (selected): private equity buyout vehicle: 3. Voting rights.

The events allowing one party to step in and take control are subject to negotiation. For example, where either:

The step-in period usually only lasts while the breach is ongoing, to allow the party stepping-in the opportunity to rectify the problems and to implement measures to prevent the breach re-occurring.

Step-in rights are not covered directly. In limited liability companies (LLCs), the members' voting rights are entrenched in the membership interests and cannot be altered by contractual arrangement. In joint stock companies (JSCs) the voting rights of the shares are entrenched at the outset and can only be transferred between the parties by an actual transfer of the shares themselves.

In theory, preference shares could be used in JSCs as a mechanism for altering shareholder voting control, by not paying the dividends and causing the shares to automatically gain voting rights. However, ordinary shareholders decide not to pay dividends and so the decision could potentially be blocked by the defaulting party if it has sufficient votes at ordinary shareholder level (and assuming sufficient funds are available to pay the dividends). The legislation was not intended for this purpose and so a contractual mechanism seeking to do this would be risky and subject to legal challenge.

At board level for both LLCs and JSCs, step-in rights cannot be imposed to alter the voting position of the directors. Directors may be nominated by one shareholder, but they are then elected to office by all shareholders and, once in office, have duties to act on an independent and unfettered basis. Directors are not permitted to act or agree to act in accordance with the instructions of one or more shareholders. They cannot delegate or transfer their voting powers (even under a power of attorney). In practice, shareholders may give unofficial directions and guidance to their nominated directors, but these arrangements potentially breach corporate legislation and are unlikely to be enforced.

In theory, step-in rights could perhaps be achieved through special provisions in a shareholders' agreement (for example, by placing an obligation of one shareholder to vote and act in accordance with instructions delivered by another shareholder). However, shareholders' agreements are a relatively new instrument and have not yet been extensively tested in the courts.