You may be able to force dissolution, depending on the governing documents or even based on the relevant laws in California. Often times it may be a combination of both. For example, some agreements may allow for dissolution if a certain percentage of the ownership wants to dissolve the business. In other cases, the governing documents may provide for a buyout of the partner(s) looking to leave the business. In these cases, there should be specific buyout procedures set forth in the governing documents. These procedures generally provide for an independent appraisal of the departing owner’s interest if the parties cannot agree on the terms of a buyout.

What Can Business Partners Do To Resolve Their Issues If They Have Reached An Impasse?

The first step that business partners should generally take if they reach an impasse when attempting to resolve issues is to resort to the governing documents of the business for guidance. There are hopefully rules and procedures in place that detail how to resolve a deadlock among the owners. In certain cases, just having the owners talk things out can get everyone to a fair resolution.

Is Mediation A Potential Remedy To A Business Partner Dispute? How Does It Work?

In many cases, mediation is very effective. In some cases, it could be required. For instance, the company’s governing documents could require mediation prior to arbitration or legal action in court. When there are no predetermined mediation procedures to follow, mediation can take on many forms. For instance, they can be done in person or virtually with the mediator who is usually an attorney or retired judge, acting as a neutral third party that tries to bring the parties to a resolution.

Mediation is non-binding meaning the mediator has no authority to order the parties to do something. It is up to them to agree on a resolution. If the mediator isn’t able to bring the parties together, then they are free to pursue whatever form of legal action the governing documents allow. If the governing documents don’t specify or don’t exist, the parties would generally commence legal action in superior court.

However, we have seen in many cases that mediation can be very effective in getting the parties to understand one another better, which leads to fair resolutions. This is especially the case when the mediator is experienced and effective. Parties generally enter the process with preconceived ideas of the strength of their position. An effective mediator will discuss the pros and cons of each side’s position and bring them together to compromise, which in almost all cases is preferable than going to court or arbitration.

Should Litigating A Dispute With A Business Partner Always Be The Last Resort?

In most cases, litigation should be the last resort to resolve a dispute with a business partner. However, if there is ongoing fraud or theft involved, it may be best to proceed directly to litigation. In a situation involving fraud or theft, it is important that you take legal action to stop the theft or fraud from continuing to occur.

What Is A Forced Dissolution Of A Business? When Is It A Remedy To A Business Partner Dispute?

There can be certain circumstances listed in the governing documents of business that require dissolution. For instance, if a partner dies, the company’s governing documents may require the company to dissolve. It’s also common for governing documents that allow the remaining shareholders to purchase the deceased shareholder’s interest. For example, a deceased member or shareholder may have a spouse and the spouse may not have any experience running this business, so the other shareholders or members might not want to be co-owners with him or her. They then would have the right to buy out the deceased partner’s interest.

In other cases, there are California statutes that require dissolutions if certain events take place. In that case, one or more of the business owners can enforce that by going to court. If an owner cannot secure the agreement of the other owner(s) on major issues and there has been an event that provides for dissolution under the governing documents or state law, legal action may be the best option to resolve the dispute.

For more information on Remedies To Business Partner Disputes, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 594-6322 today.

Art Matthews

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