Ownership and management of a business with fellow members, shareholders or partners can be difficult. It is inevitable that conflicts arise between members, shareholders or partners. Disputes are bad for business and never more so than when the dispute is from within the company itself. A business dispute can disrupt the normal operations of your business. Despite the best of intentions at the beginning of a business relationship, things often change. During the course and scope of any business, disputes will arise that can affect operations and, ultimately, the bottom line.
Typically those conflicts are resolved by the members, shareholders or partners among themselves. However, there are some disputes that involve matters integral to the operation or management of the business, or present irreconcilable differences between the members, shareholders or partners. At times, like a marriage, the best thing for the business is a “business divorce.” And that is precisely what many disputes between business owners resemble. In those situations, the engagement of skilled business and commercial litigation counsel can help avoid expensive and protracted litigation, when possible, or can guide you through the litigation process.
Member, shareholder or partner disputes can arise at any point in the life of a business, from formation to dissolution. A few examples of disputes which may require assistance to resolve or litigation include:
Interpretation of LLC Agreements, bylaws, partnership or shareholder agreements;
Member, shareholder or partner contributions
The issuance of additional equity to new members, shareholders or partners
Breach of fiduciary duty
Breach of statutory duties of members with management authority – duty of loyalty and care
Employment agreements, including non-competition agreements, non-solicitation agreements and other restrictive covenants;
Confidentiality, non-disclosure or trade secret agreements;
Severance or termination agreements for members, shareholders, partners, officers, or employees; and
But simply to deciding to split may be the easy decision. There are myriad other questions which need to be answered. How do the owners go their separate ways? What do the bylaws or LLC agreement require for the removal or departure of an owner? Which owner “keeps” the business? What is the value of the departing owner’s shares? How do you divide assets or liabilities? How are departing owners removed from any personal liabilities? Will the departing owner be asked to sign a non-compete or non-solicitation agreement?
Litigation is time-consuming and costly. For these reasons, litigation is rarely the best method of resolving differences within a business. As just one example, any documents filed in lawsuits are a matter of “public record,” meaning that those documents, and the company’s inner conflict, are available to public viewing and review. In place of litigation may be one of various methods of alternative dispute resolution, such as arbitration or mediation. Or it may be just negotiations between members, shareholders or partners or their counsel to resolve the dispute without litigation.
When members, shareholders or partners cannot find a negotiated or mediated settlement, they may have no option except to pursue litigation. When litigation a dispute between members, shareholders or partners, you need counsel with a thoughtful, careful and measured approach combined with years of experience handling such disputes.
Whether your split is amicable or cutthroat, you need guidance in managing the departure effectively to maximize your return on investment and, if you are the purchaser, make certain the business can succeed moving forward.
John W. Clark IV has represented countless shareholders and members in splits and disputes regarding ownership. John can help you find a solution to your dispute that works for you. John has experience with various shareholder or member disputes, including:
Member (limited Liability Company) Litigation
Shareholder (corporation) Litigation
Shareholder Derivative Disputes and Litigation
Shareholder/Member purchase agreements
Shareholder/Member option exercises
Shareholder/Member departures and additions
Member breach of duty of loyalty and care litigation
For counsel experienced in the art of the “business breakup” in Birmingham, Alabama, across Alabama or in the Florida panhandle, call Clark Law Firm PC.
Assisted majority shareholders in repurchase of stock of minority member
Assisted widow of minority shareholder (founder) in maximizing recovery from the repurchase of her husband’s membership interest
Settled shareholder dispute for local HVAC company after terminating minority owner
Settled derivative complaint involving homeowners’ association members’ complaints related to development of planned neighborhood