Business Owner Rights
Achieve a Quick and Painless Resolution to Your Shareholder or Partnership Dispute
Published Date: April 11, 2022
I hear many horror stories about a shareholder or partnership dispute that went on for years before reaching a resolution. I always tell people that most disputes can (and should) be brought to a quick and efficient resolution. Peckar & Abramson, P.C. brings a Results First® approach to any such case. We do this by by focusing on what’s best for the client and the business. We deploy litigation tactics designed to achieve the best result as quickly as possible. In over two decades of handling these matters, I’ve noticed several factors that lead to a successful result for the affected partners/members. I share them with you today.
Choose your counsel wisely
Your choice in legal representation in any such dispute is, by far, the most important decision you will make. Quite often, I’m asked to represent a client in a shareholder or oppressed minority LLC dispute after the passing of significant time. Sometimes I have been approached several years after the commencement of a case. It is difficult to dig out of the hole that has been created by prior decisions made in such cases. You should select counsel who has handled not one or two of these cases before, but many of them. Preferably, you want a lawyer with decades of experience. This way, you are not paying the attorney to learn the subject matter at your expense. Also, sometimes the strategies used by inexperienced counsel can set the resolution of your case back months or even years.
Gather and secure all records
Where time permits, do your due diligence well before the bottom falls out of your relationship with your partner/co-shareholder. If difficulties arise, do not act precipitously but plan your departure carefully. Assemble any financial or company data that you will need including critical emails, contracts, tax returns and the like. Very often in these cases, a client finds him or herself cut off from access to company records. This happens before they had the chance to squirrel away those critical records. You don’t want to find yourself asking the Court to grant you access to necessary documents to prove your case. Why? Because the process could be slow and cumbersome, and leaves it to the adverse party to preserve evidence. Records are key for expediency in your shareholder or partnership dispute.
At the outset, level the playing field
I often represent a minority business partner or member of an LLC where the client’s employment is abruptly terminated from the business. The client loses both salary and benefits. This person finds him or herself without information about the day-to-day management of the business. It is all part of a well-designed “freeze out” of the partner. At the outset, level the playing field. This is where experienced counsel comes in. For instance, if your employment position with the business is well documented, the Court can reinstate your salary and benefits. The Court might also choose to deprive the other partners/members of their salary and benefits until they pay yours.
Additionally, one of the most critical things to do in that situation is to be sure that your partners do not use company funds to build a war chest to fight you in litigation. In appropriate cases, courts in the last few years have become much more ready to issue an order prohibiting those in control of the partnership or LLC from using partnership or LLC funds to fight the litigation, requiring them to use their own personal funds. Such an order may help put you in a better position of leverage for a quick resolution of the dispute.
Please contact me for help handling a partnership dispute, or with any other business owner issues.