Why business disputes are like divorces

The most common reason for dissolution of a business relationship and litigation between business partners and/or shareholders is the change in the personal relationship or change of business goals, views, or purpose — and there is nothing in the governing documents that considered the issue and provides a way to resolve or mitigate the problem. Business disputes are similar to divorces; parties are dissolving the relationship due to some dispute or triggering event and trying to divide assets.

It all begins with good intentions…

One or more people come together with a vision and plan for a business. They decide not to pay to meet with a business attorney (like Ryan Blaney of Counsel for Kendall Law) to assist in picking the best business formation and they don’t have a plan for the “what ifs” or how to resolve a dispute. 

They choose to be a corporation and issue equal shares in the company. The First shareholder puts in all the money and the Second does all the work. They are off and running their business.

For 30 years, the Second shareholder runs the business. During that time, the First shareholder takes care of the finances of the business and Second shareholder provides all the labor. The Second shareholder wants to retire by selling the business and requests to review the records to determine the value. First shareholder does not allow Second shareholder to review of the books, but after a reminder of his duty to allow inspection, he turns over the books. Second shareholder finds that First shareholder has been taking a large distribution for years while telling Second shareholder that the business was not making enough money and only giving him a small distribution.

How does Second shareholder get the money that is owed?

Because this is a closely-held company (only a few shareholders) Second shareholder would need to call Kendall Law to bring a direct action for breach of fiduciary duty, misuse of corporate authority (among other things).

Are you in a business where the controlling shareholder or partner is not providing you access? Perhaps one of your business partners is not acting in the best interest of the company? If so, call Kendall Law for a consultation.