Business partnerships are like any other relationship. There needs to be trust, commitment, an understanding as to respective roles and a shared vision.
Unfortunately, business relationships can fall apart just like personal relationships.
Disagreements within a partnership need to be handled with care, particularly where they have the potential to cause disruption to the business. Every partner needs to lay their cards on the table, outline where they stand, and be clear about what it is they want to achieve.
Sensible and pragmatic discussions then need to be had to determine whether the partnership can survive. If not, you will have to determine whether the best option would be for certain partners to leave while the others continue, or for the partnership as a whole to be even dissolved.
There are only two ways in which a partner can be removed from a partnership or an LLP. The first is through resignation and the second is through an involuntary departure, forced by the other partners in accordance with the terms of a partnership agreement.
Where no partnership agreement exists, or where no power of expulsion is conferred, a forced departure cannot be effected. In these circumstances, the only options will be to try to persuade the partner you are having difficulty with to leave, or else to bite the bullet and have the partnership dissolved so that you can cut your losses and start again.
Persuading a partner to exit a business arrangement which is no longer working can be relatively easy where relations remain amicable and there is broad agreement that it is in everyone’s interests for a deal to be done. However, it can be much harder to achieve where distrust has begun to creep in and where the problematic partner is reluctant to go.
There will be numerous issues to consider such as:
Some form of settlement can normally be agreed through written communications, face-to-face meetings or via an independent mediation process.
Where an agreed exit cannot be secured, thought will need to be given as to whether the partnership should be dissolved and how this can be achieved.
Depending on the circumstances there may be several options, including:
The following will also frequently need to be considered:
Partnership disputes can arise for a variety of reasons and are on the increase due to the stresses and strains being put on business relationships by the present economic conditions. Tackling them head on, and at an early stage, can greatly increase the chances of everyone involved achieving a good outcome.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Published on 31 January 2023