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Partner and Shareholder Disputes

Partner_ShareholderDisputesMany businesses are owned by two or more owners—whether termed partners, shareholders, or LLC members. At the time of a business’s founding, all of the investors shared a common goal for the business and their future plans. While the company may have run smoothly at the beginning, something may have gone wrong along the way, leading to challenges and partner disputes. Or, due to outside interests, one owner may decide to do something else with their life, leaving the other(s) to function without them. Owner disputes, if not resolved fairly and promptly, can destroy a business and the relationships among its partners. When disputes arise that threaten the business’s viability, dispute resolution with a professional mediator is often the best option.

Why Owner Disputes Arise

Whenever money and emotions are involved, problems are bound to arise. Often, the more successful a business, the more likely owner disputes are to occur. Why? Because there is typically more to dispute about and more finances to fund the dispute. Owner disputes often occur due to one or more of the following:

  • A breakdown in communication, leading to a loss of trust and respect among partners.
  • Perceived issues between contribution and reward. (e.g. one partner believes the other is not doing his share of the work although still reaping the benefits.)
  • Engaging in activities that are not in the company’s best interests.

Business Divorce

Like a marital divorce, the separation of long term business partners can be filled with emotion and hurt feelings and the process itself can lead to severe financial consequences. In order to force a purchase of his/her shares, litigation is often instigated by one of the business partners who claims either deadlock, oppression by the other shareholder or another legally recognized claim — whether or not all the technical requirements are arguably met.

From the legal/corporate  side, without a prior agreement, such as a buy-sell agreement in the by-laws or LLC operating agreement, there is no easy path to compel a sale of an interest back to the company or the other shareholder /partner, not to speak of valuing the interest.

Case books are filled with reports of lengthy and, no doubt expensive, litigation proceedings  between former business partners that ended up in court proceedings because a negotiated agreement could not be reached between former colleagues who no longer can work together.In the meantime the business, without a rudder, flounders, losing customers and revenue.

Courts have a difficult time sorting out the conflicting demands of a business divorce case and the legal remedies available are limited. No judge is going to be able to allocate customers, leases, and intangibles in any rational manner. The parties, however, are the logical parties to do so in the context of a mediation.

Dick Lutringer has mediated contentious business divorces in such fields as medical practices, restaurants, limousine services and real estate partnerships and is the author of a law journal article on the topic.  If you or your business partner are contemplating a “divorce”, Dick can help you resolve your differences and get you on your own paths more effectively and efficiently than litigation.

Dispute Resolution with Richard Lutringer

With my background as a business lawyer and current role as a mediator, I take an experienced approach to partner dispute resolution. I generally meet with each owner individually, in addition to meeting with all parties together, to assist with developing creative ways to resolve issues. As a neutral party, I focus on finding ways to improve communication and understanding. Depending on the severity of the problem, during the mediation process, the partners may redefine their goals—both immediate and future, revisit their business’s vision, while working toward a win-win solution.

My goal is to help you find a way to work through your dispute and continue to grow your business. In some cases, when agreements cannot be reached, it may be in everyone’s best interests to sell to third parties, reach an agreement on buy-out, or simply split up the business. In very few cases, would it be in anyone’s best interest to battle out the dispute in court.