Like in every relationship, conflicts can arise because of outside demands, financial worries, and a lack of a clear future course. This is also the case in a business partner dispute. The easiest way to resolve conflicts is through communication, but if that is not possible, legal action may need to be taken into consideration. It is important to think about mediation as an alternate dispute resolution method before going to court.
In a mediation, the disputing parties will be represented by solicitors, and the mediator will serve as an impartial third party looking to assist in the negotiation of a settlement. Mediation is more expedient and less expensive than courtroom proceedings. Resolving the business partner dispute, whether through mediation or litigation, requires an understanding of the alternatives, the legal remedies available, and whether these are likely to be upheld by a court. The type of legal relationships between the parties will frequently affect the legal remedies that are available in a commercial dispute.
Is it Possible to Dissolve a Business Partnership?
The conditions of the business partnership agreement signed by the partners will control the legal ties in both limited liability and regular partnerships. In the absence of a partnership agreement, normal law will take precedence and a partnership agreement will be implied. Only in cases where it is expressly allowed in the partnership agreement may one partner be dismissed from the partnership. This will probably also specify the removal procedure to be used, the amount of compensation to be paid upon removal, and the length of time over which that compensation is to be paid.
If the removal is to be warranted on the grounds of one partner’s breach of the partnership agreement, it is critical to ensure that the process outlined in the agreement is followed and is also fair. This could include giving the removed partner the chance to explain or defend their actions. Failure to follow the process correctly will invalidate the removal attempt and may result in a potential claim for damages against the partnership, putting additional financial and personal stress on the relationships.
Keeping Records and Collecting Evidence
It is crucial to have an accurate and thorough record of the actions that gave rise to the application if a court order for dissolution is to be requested. If the subject is challenged and needs to be decided at a hearing, witness testimony will be crucial, but contemporaneous evidence of the activity will also be crucial. This could be minutes from partnership meetings or letters that were sent out at the time outlining issues.
It may be worthwhile to seek advice to ensure that matters are recorded correctly, and meetings are conducted fairly and in line with the partnership agreement so that these can later be relied upon in evidence if partners are worried that disputes may not be able to be resolved by agreement and think that court action may be necessary.
The partners’ sole responsibility after a partnership is dissolved is to close the partnership’s affairs, realise its assets, and distribute them to the partners after all debts and other responsibilities have been paid. If a partner or partners continue to use partnership assets after the partnership has been dissolved, the partnership may once more file claims against them.
Dispute Resolution in Joint Ventures
Joint venture agreements are frequent when parties have joined forces to take advantage of a specific business opportunity and have established a separate company specifically for that purpose. The shareholders frequently have multiple commercial interests, and during difficult economic times, disagreements over how much time and effort each shareholder is devoting to the joint venture or whether the joint venture is succeeding are not unusual.
Once more, understanding the obligations, rights, and remedies of the parties begins with the joint venture agreement that the parties engaged into at the outset. Such agreements frequently include clauses intended to settle disputes if they are professionally crafted. For instance, the agreement will typically include stalemate clauses that take effect when the directors are unable to agree or when one party asserts a veto. This may force one party to transfer its shares to another in certain situations and frequently requires parties to refer disagreements to an impartial third party who can be obliged to act as a mediator, expert, or arbitrator.
In the case of a registered company dispute, the ultimate solution for a shareholder is to seek the dissolution of the business and the appointment of a liquidator. Although liquidation is usually considered when a business is insolvent, it can also be used when the court is convinced that it is “just and equitable” for the business to be wound up. This is, however, a last resort, and the result of liquidation, like the equivalent process for dissolving a partnership, will be an end of all trade.
A company’s assets must be realised once a liquidator has been appointed, and any capital that is left over must be returned to the shareholders once all debts and liabilities have been paid in full and the costs of the liquidation have been covered. In addition to the increased expenses, assets are typically sold off in a liquidation at a lower price than they would be if they were sold as a going concern, which decreases the value for shareholders and frequently results in a much lower return on investment.
If your business is involved in a business partner dispute or you wish to pursue a claim on behalf of your business, contact us online or by phone on 0208 769 6739 to arrange an appointment. A commercial litigation solicitor will be in touch with more on how we can help you.