In theory, business partnerships are mutually beneficial arrangements. Both partners profit from the success of the company and can rely on the investments, hard work and expertise of one another. Unfortunately, not everyone who enters into a partnership does so earnestly and in good faith.
Some people overstate their commitment to the company or their professional capabilities. Others are honest about what they can do but may secretly plan to abuse their position of trust within the company. When one business partner realizes that the other has misappropriated assets or embezzled money from the organization, they may feel compelled to take assertive action to protect the organization itself and their investment in the company. Business litigation is sometimes necessary in scenarios where one business partner has engaged in overt misconduct that has harmed another and/or their business.
How can litigation help?
Ideally, business partners should have written agreements that include provisions for terminating the partnership. Some partners don’t discuss the eventual need to dissolve the partnership or allow one partner to buy the other out when initially reaching an agreement about starting a company together.
Even if they have included those terms in the agreement, the partner accused of misconduct may refuse to accept responsibility and agree to a buyout. Litigation is sometimes necessary to secure the intervention of a judge who can either interpret the initial partnership agreement and or help arrange for a buyout despite the objection of one partner.
Litigation can also help in scenarios where there is evidence of financial misconduct. Business partners typically have a fiduciary duty to the company they started together. If one partner fails to act in the best interests of the company, the other might be able to take legal action seeking damages for the losses that occur due to their misconduct.
Successful litigation can compensate the business itself or the other partner for the financial harm caused by embezzlement. Litigation can be a way to resolve the matter appropriately without seeking the prosecution of a partner.
Reviewing a partnership agreement with a skilled legal team can be a good starting point for those who believe that business litigation to terminate a partnership agreement is now necessary. Taking timely action can protect a partner concerned about another’s misconduct from additional losses and allow them to regain control over the company to help it thrive in the future.