How To Avoid Disputes With Your Business Partner
Do you have concerns about the conduct of your business partner? Are you wanting to avoid a dispute with them?
In our latest video our Director, Alex Martin, shares his tips on how to best deal with the issue.
If you would like to discuss your potential business partnership dispute, please contact one of our experienced commercial lawyers at Taurus Legal Management on (03) 9481 2000 or at firstname.lastname@example.org.
So, if you’re having concerns about the conduct of your business partner, what do you do? That’s a question I get asked a lot and sometimes it can be sorted out easily, but sometimes it escalates into a full on dispute, which I need to help manage. So I just want to give you some tips today on how to deal with problems with business partners.
Hi, I’m Alex Martin. I’m a commercial litigation specialist and these are my No Bull Legal Tips for business owners. Okay, so if you’re having issues with your business partner, the first question is, what are your rights? Now it might seem straightforward, but it’s actually a complicated question. The first thing you need to do is look at your agreements. So look at if you have a partnership agreement, shareholder agreement, the unit trust deed, whatever the governance agreements that govern your company or business are. You need to have a look at them and look very carefully at what the rights are around voting and what the rights are around expulsion of a partner if it comes to that because if you need to expel a partner, you need to follow what it says in the agreements very carefully and very exactly. If you don’t know how to follow those steps exactly, then get some legal advice because if you don’t follow those steps, then any decision you make might not be binding. If you have a vote and make a decision in the vote, but you vote using the wrong mechanism, then that vote might not be binding so have a look at the agreements and see what they say. If you don’t have a governance agreement at all, you’ll have a company constitution at a minimum. But if you don’t have a shareholder agreement or a partnership agreement, then you need to look at what the Corporations Act allows, or the Partnership Act allows if you’re in partnership. So look at what the legislation says.
Effectively, that’ll say that that all partners need to act in the best interests of the business and if they’re acting in their own personal interest, then they’re likely to be in breach of the Corporations Act, in breach of the Partnership Act and you may have a legal claim against them. Obviously, you want to approach the partner and see if you can deal with it by negotiation but if you can’t, then you need to understand what your rights are under the agreements and under the legislation before you take any action. If you’re unsure about that, then you should get legal advice early and the earlier you get legal advice so that you know where you stand, the more likely you are to resolve these things without litigation. And if it does come to litigation, then you really want understand where you stand and what the likely outcome in litigation would be.
Certainly, the court can expel a business partner by force, but it’s very unusual. What typically happens is a proceedings issued against a business partner, then one part buys out the other or the remaining partners buy out the single partner. So you need to go and get a evaluation of the business so you know what a reasonable buyout would be and be ready to negotiate. Even if you’re in litigation, ultimately that’ll probably be settled by negotiation.
So I hope that helps. If you’ve got any questions, please message me directly. But stay at a trouble out there when you’re dealing with your business partners.