Resolving Partnership Disputes
Disagreements in 50/50 business partnerships are common in the UK and can be challenging particularly when there can be mistrust and emotions involved. Partnership disputes can cause disruption to your cash flow, staff, and clients.
We help clients resolve partnership and shareholders disputes quickly and cost-effectively. Our lawyers have been described as among the “best litigators in the country” and specialise in taking a proactive approach to achieve the best outcome.
Partnership disputes often arise because the partners may have different business visions, financial disagreements, or profit-sharing issues. When partners have equal control in the business, decision-making becomes difficult, leading to deadlocks that can stall the business and create a stressful environment.
It is important that partnership disputes are dealt with promptly and effectively. Unresolved partnership disputes can cause the business to collapse (particularly where there is fraud, misappropriation, or diversion of clients), affecting the business’s operations and reputation. Seeking advice from our experienced business partnership dispute lawyers is essential.
Our partnership and shareholder dispute lawyers are here to help obtain a quick and successful resolution, please call us for a Free Consultation on 0207 459 4037.
Possible Solutions to Partnership Disputes
Resolving disputes in a 50/50 business partnership requires finding solutions that are agreeable to both parties. The key is to focus on outcomes that preserve the business’s interests while respecting each partner’s rights. The potential solutions can include:
- Negotiation and Mediation: Often, the first step is to try and resolve the issue through direct negotiation. If this does not work, mediation with a neutral third party can help partners find a middle ground. This approach is less formal and costly than legal proceedings and can lead to a more amicable resolution.
- Buy-Out: One partner may choose to buy out the other’s share. This requires a fair valuation of the business and agreement on the buy-out terms. It allows one partner to take full control while providing the other with compensation.
- Restructuring the Partnership: Altering the partnership structure, such as bringing in a third party or changing ownership percentages, can help break deadlocks and introduce new dynamics to facilitate decision-making.
- Dissolution and Sale: If other options fail, dissolving the partnership and selling the business might be the last resort. While it means the end of the business in its current form, it provides a clean break and financial return for both partners.
- Legal Action: As a final measure, legal action may be necessary. This step involves the courts and can be time-consuming and expensive. It is usually considered when other methods have failed and a legally binding decision is needed.
It is important to remember that each partnership is unique, and the best solution will depend on the specific circumstances of the dispute. Expert advice from business partnership dispute lawyers can guide partners towards the most suitable resolution method, ensuring the best possible outcome for the business and its stakeholders.
Common Partnership Disputes & Disagreements
In the context of 50/50 business partnerships, certain types of disputes arise more frequently. Understanding these common issues can help partners anticipate and manage conflicts more effectively. Our partnership dispute lawyers specialise exclusively in commercial litigation and dispute resolution and are an adviser of choice for many clients in England & Wales with partnership disputes. We frequently act in complex partnership disputes, including disputes related to:
- Diverting Business from the Partnership
- Breach of Partnership Agreement
- Dissolution
- Misappropriation of Funds
- Disputes Over Profit Share
- Disputes Over Business Direction
- Management Style Conflicts
- Personal Disputes Affecting Business Operations
- Withdrawal or Addition of Partners to the Business
- Managing Allegations of Financial Mismanagement
- Fraud
How to Remove a Partner from the Partnership
Removing a partner from a 50/50 business partnership can be a complex process, particularly in the absence of a pre-agreed partnership agreement. In our experience, a 50/50 partner can be removed from the company through one of the following ways:
- Mutual Agreement: The simplest method is through mutual consent where both partners agree on the departure and terms of one partner. This often involves negotiation and can result in a buy-out agreement.
- Invoking Partnership Agreement Terms: If there is a partnership agreement in place, it may contain specific provisions for the removal of a partner. These terms must be followed carefully to ensure legal compliance.
- Forced Exit Due to Breach: If a partner breaches the partnership agreement or acts in a way that is detrimental to the business, they can be forced out. This typically requires legal action and proof of the breach.
- Dissolution of Partnership: In some cases, the only solution may be to dissolve the partnership entirely. This is often a last resort and involves winding up the business operations and assets.
- Buy-Out under Specific Circumstances: Certain conditions, like retirement, bankruptcy, or long-term illness of a partner, may trigger a buy-out clause in the partnership agreement, leading to their removal.
- Legal Remedies: If partners cannot agree, legal intervention may be required. Courts can order the removal of a partner under certain circumstances, such as misconduct or incapacity.
It is important to handle the removal of a partner delicately and legally. Professional advice from a business partnership dispute lawyer is often necessary to navigate the complexities of this process, ensuring compliance with legal requirements and protection for all parties involved.
What is Partnership Dissolution?
Partnership dissolution refers to the process of legally ending a partnership. In the context of a 50/50 business partnership, dissolution can be a significant step, especially if other means of resolving disputes have failed. There are several ways in which a partnership can be dissolved:
- Decision to Dissolve: The process starts with the decision to dissolve the partnership, which can be mutual or initiated by one partner. In some cases, specific events like bankruptcy, death, or incapacity of a partner can automatically trigger dissolution – this will depend on the terms of the partnership agreement (if one exists).
- Notification and Legal Processes: Following the decision to dissolve the partnership, legal steps must be taken to formalise the dissolution. This includes notifying relevant parties, such as creditors, clients, and employees.
- Settling Debts and Liabilities: The partnership must settle its debts and liabilities. Creditors are usually paid first, and if the partnership assets are insufficient to cover all debts, partners can be personally liable for the balance.
- Distribution of Remaining Assets: After settling debts, any remaining assets are distributed among the partners according to the terms of the partnership agreement or, in its absence, according to standard partnership laws in the UK.
- Winding Up Operations: This involves completing any unfinished business, selling assets, and terminating contracts. The goal is to conclude all business affairs neatly.
- Legal Consequences: Dissolution can have various legal and financial implications for the partners, including tax consequences.
- Potential for Continuation in New Form: Sometimes, after dissolution, a partner may choose to continue the business in a new form, either as a sole trader or in a new partnership. This can be negotiated as part of any negotiation to dissolve the business.
Dissolution is a significant step and can be complex. Our approach to partnership disputes is tailored to the specific needs of each partnership, recognising that every business relationship is unique. Whether you are facing a dispute over financial matters, management decisions, or contractual obligations, our expert team is here to guide you through the complexities of partnership law and achieve a resolution that protects your interests (including dissolution where necessary).
Case Example – Successful Resolution of Partnership Dispute
Our expert partnership lawyers have successfully acted for many clients with partnership disputes including where there is no formal partnership agreement. Our aim is always to seek to resolve matters quickly so that there is minimum disruption to the business and its clients and find an amicable solution (or to agree favourable settlement terms).
Our lawyers recently represented a partner in a dispute with his co-partner involving allegations of misappropriation of funds, diverting business and breach of the partnership agreement. Our expert lawyers were able to negotiate a successful outcome within 3 months of instruction. In this case, the partners could no longer work together as the trust had been broken. There was an agreed settlement as to the separation of clients and finances (including taking into account the funds that had been misappropriated by the other partner).
Winning Approach to Resolving Partnership Disputes
We pride ourselves on our client-centric and results-driven approach, tailoring our litigation strategies and funding solutions to meet the unique commercial needs of each client.
Our partnership dispute lawyers are recognised among the best lawyers in England & Wales, and have regularly been asked and featured to write authoritative articles in the Financial Times, Law Society and LexisNexis and have been quoted in City AM, the New Law Journal, Law Society Gazette and Litigation Futures.
Our specialist litigation team is Partner-led to provide straightforward, honest and strategic advice. We also have a strong legal network of solicitors, barristers and forensic accountant experts to call upon and advise you throughout to ensure you get the best result.
Our unique approach to partnership and shareholder disputes means that we will:
- Arrange a Free Consultation with you & a qualified lawyer to discuss your partnership dispute
- Arrange a WhatsApp group with you & your legal team
- Free Asset Tracer & Due Diligence Report
- Investigate the merits of your claim & create a strategy for success
- Work with our in-house accountants to report any financial losses
- Send documents easily through our secure client portal, Go Transfer
- Advise you on any judgments & tactics that have proved successful in other partnership disputes
- Assess the amount you may be able to recover
- 24/7 chat feature with a qualified lawyer
- Fixed fees & “no win no fees” are available
- Work hard to get the best outcome
Our partnership dispute lawyers offer regulated, independent & confidential legal advice and are dedicated members of the Professional Negligence Lawyers Association, the London Solicitors’ Litigation Association, the Association of Cost Lawyers, the Insolvency Lawyers Association and the Commercial Litigation Association.
Mediation in Business Partnership Disputes
Mediation plays a crucial role in resolving partnership disputes and disagreements. Alternative dispute resolution, where suitable, provides many advantages for parties in partnership disputes. It offers the parties control over the process and a more collaborative and less adversarial approach than litigation, focusing on finding mutually agreeable and flexible solutions.
Mediation can often be cheaper and can be particularly useful when negotiating outcomes that the Court will not be able to order such as a split of the clients, assets and intellectual property.
Our lawyers are strong advocates for mediation, which can often lead to favourable settlements in partnership and business disputes. Several of our lawyers are trained mediators and expert negotiators who are registered members of the Chartered Institute of Arbitrators (CIArb) and the International Mediation Institute. Our expertise in mediation gives our partnership dispute lawyers a significant and unique advantage when navigating settlement discussions on your behalf.
Free Consultation with Partnership & Shareholder Dispute Lawyers
We provide flexible funding options including fixed fees and “no win no fee” arrangements to achieve a resolution in your partnership and shareholder dispute.
Our expert partnership dispute lawyers in London provide exceptional legal services to get you the best outcome quickly and cost-effectively: this is our promise.
You can read our other Free Guides on Partnership Disputes – The Legal Implications of Deadlock in 50/50 Owned Companies and Navigating Partnership Disputes: A Step by Step Guide. You can also find more information on Partnership Disputes on our dedicated expertise page here.
If you have a partnership dispute or are concerned about a disagreement within your business, please book a Free Consultation with our expert partnership and shareholder dispute lawyers. You can call us on 0207 459 4037 or use our booking form below.
