WE’RE EXPERTS IN PARTNERSHIP, CLOSELY-HELD CORPORATION, AND LIMITED LIABILITY COMPANY DISPUTES
When partnerships go bad, there are usually winners and losers, and this should serve as a reminder that business relationships involve risks that can and should be mitigated with thoughtful planning. It also means that before you enter into any sort of business entity, you should write and sign a contract laying out the terms of that relationship. Note that what applies to partnerships is valid as well for other types of closely held businesses – including limited liability companies (LLCs) and corporations – in which individual personalities can have significant influence on business outcomes.
A well-drafted partnership/membership/ownership agreement should spell out how you and your partner(s) will run your business, and it should provide mechanisms to avoid intra-company disputes before they begin. It should outline expected behaviors (e.g., governing use of company assets and outlining fiduciary duties) and provide sensible pathways for resolving disputes.
Common issues include: What should be the process for making capital contributions, if required? Or distributing profits? Does the company use intellectual property belonging to one of the company owners, and if so, is it using that intellectual property under license? If the owner of the intellectual property leaves the company, does the company have protected usage rights for a certain period? And if a company owner leaves the company, what constraints, if any, are there on his or her ability to compete against the company?
In highly regulated industries, such as cannabis, there may be legal requirements to disclose all participating members and sources of financing to regulators, and the question of who holds particular licenses to conduct business can be a significant issue to the functioning of a partnership. In some countries, an owner leaving the business must be reported to governmental authorities and that can even impact the ability of the company to continue its operations.
Common litigation issues include injunctive relief, breach of fiduciary duty, shareholder oppression, misappropriation, waste, commercial disparagement, fraud, shareholder rights and derivative actions, non-disclosure agreements, conversion, expulsion, the business judgement rule, and breach of contract.
If you do find yourself in a partnership or other intra-company dispute, a thoughtfully drafted contract will take you a long way toward a relatively inexpensive and favorable resolution via negotiation, mediation, or arbitration, with litigation usually the last resort.
Having successfully resolved hundreds of civil and commercial disputes around the world, we know that strong contracts are key when it comes to protecting our clients’ business interests. We help our clients identify the contract language they need, and we offer comprehensive support in contract negotiation, drafting, translation, and enforcement.
But when our clients do find themselves in partnership/ownership dispute litigation, our business litigators work to present early options to protect our clients’ investments, including seeking temporary receiverships, accountings, and other remedies that can keep the dispute from leading to significant losses. We have successfully litigated many ownership disputes in many different courts.