7 Options for Resolving Partnership Disputes

Posted by woodpieterson on October 5th, 2022

Disagreements and conflicts are part and parcel of every partnership, both personal and professional. Business partnerships often face conflicts because each partner has a different personality, and they can’t always be on the same page. Sometimes these conflicts turn into major disputes that threaten not only business relationships but also the overall company. In such cases, it’s best to seek professional help and explore different options for resolving partnership disputes.

Wembley Solicitors expert in resolving business disputes in London, UK. They have shared some viable options to help you make an informed decision.

Mediation

Mediation is a confidential, quick and constructive dispute resolution option. It allows the partners to make their own decisions instead of relying on a third party or a judge. Mediation is one of the most common ways of resolving partnership disputes where business partners resolve their differences in an informal, closed-door setting.

For this process, you’ll need help from a professional and knowledgeable mediator who is experienced in handling business disputes. This option is well suited for business partners who have communication issues, differences of opinion or a lack of trust. Most people opt for this option because it isn’t a public process where a business has to disclose its confidential matters. It preserves employee morale and business integrity. If

Role of a Mediator

The role of a mediator is to facilitate a constructive and affirmative environment where business partners can address their concerns. They use their knowledge and experience to help partners identify issues and overcome distrust to prevent them from entering into a bitter fight that can result in business losses.

Mediators also help them recognise if continuing to be in business together will be beneficial for the partners or not.

Buy-Out

If the result of the mediation process suggests that the partners can no longer work together, the mediator often suggests a buy-out. A buy-out is a process where one (or more) partner buys the others’ partnership interests to discontinue their business relationship. This option is suited when some partners want to leave the business while others believe it must continue.

If the partners already have a buy-sell agreement, they follow the procedures mentioned. Otherwise, the first step will be to obtain a company valuation, so partners understand the worth of their interests. Then they decide the terms of buyout and who will be bought out.

Unlike mediation, the buy-out involves legal and financial counsel for negotiation and execution.

Sell-Out

If the partners have decided they don’t want to work together and no party is interested in the business, they opt to sell out to new owners. Sell out option is suited when a business is still viable and each partner wants their share. They look for potential buyers to sell each partner’s interest.

Buyers can be competitors, company employees, or any other entity. This procedure also involves company valuation and hiring legal counsel.

Voluntary or Judicial Dissolution

After mediation, if partners mutually decide they can’t work together and salvaging the business isn’t an option, they would dissolute their business entity. When partners agree to voluntarily dissolution, the process will involve filing the paperwork with the government, selling remaining assets, distributing proceeds, and paying debts. However, if partners disagree on dissolution, they will have to seek help from the Companies House for judicial dissolution.

Squeeze-Out Merger

If the business partnership shares aren’t equal, those who own more shares can freeze out minority owners through a merger. During a squeeze-out merger, the majority shareholders create and own a new company, and minority shareholders are bought out of ownership with a fair market value (FMV) of their interests.

Squeeze-out mergers are not always smooth and involve authoritative and precedential court opinions. You also have to hire an experienced business attorney.

Litigation

Sometimes partnership disputes arise due to misconduct by one or more parties. It can include fraud, asset misappropriation, contract breaches, failure to fulfil obligations, etc. Litigation involves lawsuits between partners where one party files a legal cause of action against another. These cases require litigation counsel.

Bankruptcy

If the partnership disputes are due to the company’s financial instability, a mediator may suggest they file for bankruptcy. Bankruptcy is the only solution when each partner’s debt exceeds their assets. In some cases, bankruptcy will let the business reconstitute its debt to continue its operations. In other cases, the only viable option is to go for a full liquidation.

If you need help with any of these options, you can hire lawyers at Wembley Solicitors. It’s a leading law firm in the UK offering a wide range of legal services at a fixed and affordable rate. Besides partnership disputes, they also help in getting a legal separation, acquiring a UK visa, resolving loan disagreement disputes, and much more. Contact them for details.

About the Author

Olivia T. is an experienced litigator in the UK and is currently affiliated with Wembley Solicitors, a law firm. She also writes informative guides to help individuals deal with corporate issues.

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Joined: September 6th, 2022
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