DISPUTE RESOLUTION
Disputes come in different forms
Disputes in business can take many forms. They can be so serious as to threaten the vary survival of the business, or they can be minor issues requiring no more than a heart-to-heart discussion between partners.
Where a serious dispute between co-owners has left the business in a parlous financial state, it could be appropriate to consider using our corporate rescue or recovery services, which you can read more about by clicking on the Corporate Recovery link. Where disputes involve a co-owner wishing to leave the business, without necessarily threatening the business's survival, we would deal with this under our dispute resolution service, which is covered on this page.
Exit disputes
Disputes between co-owners can lead them to believe that the only solution is for one of them to leave the business. Perhaps the business has not gone as well as hoped; perhaps their working styles and philosophies are too different; perhaps personal relationships have deteriorated for a variety of small reasons. But, whatever the reason, one or more of the owners wants to get out.
In other cases, although there has, perhaps, been prior agreement about a partner's leaving, negotiations concerning such issues as value, or payment terms can break down because there is no shareholders' agreement that specifies how these matters are to be resolved.
In all these circumstances, exit is not a planned and ordered disposal at the time of the owner's choice (see Exit Strategy Planning), rather it is all about trying to get out of a messy business marriage at the least cost and with the minimum disruption to your life.
The shareholders' agreement
When disagreements arise between co-owners about exit and shareholding issues, it is very useful to refer back to any agreement between co-owners that might have been drawn up prior to the dispute. If the agreement has been properly drawn up it should lay down how disputes about ownership and share buyouts should be resolved (see: www.exitstrategyplanning.com)
If, however, the co-owners have not entered into an agreement that addresses these issues, it could be very difficult (or even impossible) to reach a resolution. In the case of a major dispute between equal 50% owners, the lack of a shareholders' agreement could lead to an insoluble deadlock and the company being wound up.
The questions that need resolution
Where there is a major internal dispute that leads to a partner wishing to exit and with no shareholders' agreement as a guide, owners face a complex web of issues that need to be resolved before they can reach agreement. Some of the more important questions that need answering include the following:
- What is the business worth and what are my shares worth?
- How is the business goodwill to be valued?
- As a shareholder, do I have access to the company's accounts?
- Can I force my co-owners to buy me out?
- Can I force my co-owners to sell their shares to me?
- Can I afford to buy out my co-owners?
- Can they afford to buy me out and, if not, how can I make it easier for them?
- What are the taxation ramifications of buying, or being bought out?
- What are the legal ramifications of a split?
- What happens if we don't agree terms?
- What does "a shareholder deadlock" mean?
- How can we wind up the company and how will being a director of a failed company affect my business standing?
- What are a Compulsory and a Creditors' Voluntary Liquidation?
- What might happen if I sue for what I think I am due for my shares?
You need expert advice
These matters are complex at the best of times (and usually outside the experience of the small business owner), but without a shareholders' agreement that addresses shareholders' exit rights and options they can be even more difficult to unravel!
The best way to resolve these questions is to get expert, experienced advice. This is where we can help. We have extensive experience in dispute resolution, both in the UK and abroad, and are perfectly placed to guide you through the commercial, legal and accounting maze of a messy break up. Our unique blend of professional and business experience can help you to find the optimum way out of the business, or the best way of buying out your partners, or the least painful way of handling a business break up and close down.
Contact us
To contact us for a free, confidential and no obligation discussion, click on and complete the enquiry form below.
