Often, a partnership is key for a successful business. Whether for financing, expertise, or simply the joy of working with others, many companies are built and run by more than one person. Unfortunately, this also means having more than one opinion and approval required for various business decisions, which can lead to disputes. So, how are disputes between business partners resolved?
This blog post will provide an overview of several options to help resolve a business dispute.
Review Your Guiding Documents
If your business is a partnership, chances are you have some form of guiding document outlining each partner’s responsibilities, duties, and decision-making powers.
You should have a partnership agreement if your business is a general partnership. However, depending on how your company is structured, other legal documentation, such as a shareholder agreement, might govern your activities. A partnership agreement may provide guidance or answers on resolving a business dispute. Alternatively, it might explain what the partners are expected to do in the event of a dispute, such as engaging in alternative dispute resolution to resolve the issue.
What if My Business Has No Guiding Documentation?
If your business does not have a partnership agreement, carefully review any documentation in your possession that provides guidance on the partnership or how to manage disputes.
Speak With Your Partner
Often, the simplest way to resolve a dispute is to have a conversation with your partner. A “conversation” can be held in person, but other methods of communication may be more appropriate depending on the circumstances.
If you are not communicating in writing, be sure to take notes of what was discussed along with the outcome. If the dispute is not resolved, it is important to have a record of what was said and when.
Consider Alternative Dispute Resolution
If a conversation with your partner fails to resolve the dispute, consider pursuing alternative dispute resolution methods. Depending on the terms of your partnership agreement, you may be required to resolve disputes through a number of alternative dispute-resolution processes.
Some of the most common forms of alternative dispute resolution in Ontario include:
- Negotiation: In negotiation, the parties, typically through their lawyers, meet to discuss the dispute and work together to compromise and resolve the issue.
- Mediation: In mediation, the parties work with an mediator (a neutral third party) who works collaboratively to help the parties settle their dispute.
- Arbitration: In arbitration, the parties present their case to the arbitrator (a neutral third party) who decides based on the applicable laws. Arbitration is typically a less formal and more flexible process than appearing in court.
Different alternative dispute resolution methods will work for different parties. If the partnership agreement does not direct you to a specific form of alternative dispute resolution, speak with an experienced business dispute lawyer to determine the best way to proceed.
If All Else Fails, Litigate the Dispute
Despite your best efforts, sometimes litigation is the best option – or an inevitability after alternative dispute resolution fails.
In litigation, the parties present their evidence and arguments in court and are bound by the judge’s decision.
Additional Thoughts on Settling Disputes Between Partners
Partnership disputes can have a devastating effect on businesses in terms of business interruptions, the relationship between the partners, and the longevity of the business itself. Further, significant time commitments and financial costs often accompany the resolution options outlined above.
Ultimately, the best way to deal with a partnership dispute is to take steps to avoid one in the first place. Some tips for managing partnership disputes are set out below.
Tips for Managing Partnership Disputes
The best way to avoid or manage partnership disputes is to be prepared by:
- Thinking carefully before entering a partnership. It is essential to think critically about whether your business partnership will work for everyone involved. While it can be tempting to enter into a partnership with a friend or family member, keep the business – and its demands – in perspective.
- Consulting lawyers. Hiring a business lawyer to draft your partnership agreement and other relevant legal documents is an important step to ensure that each partners’ interests are represented fairly. If you have questions regarding the partnership agreement, do not hesitate to consult your lawyer to ensure you have a thorough understanding of the agreement prior to signing.
- Put everything in writing. Having a partnership agreement is critical. It is also important to document business conversations and decisions in writing so the partners can refer to them later. Taking this step can help you stay on top of what has been discussed and what decisions have been made and by whom. Having written references can also help resolve disputes when recollections regarding actions or decisions vary. Be sure to store these documents in an easily accessible place where all partners can access them, such as your place of business.
- Working through disagreements together. The reality is that day-to-day disagreements regarding the business will often arise between partners. Having open and honest conversations with your business partner is critical for the health of your business. Ensuring that you stay on the same page and manage disagreements reasonably is a critical skill for any business partner.
If, despite your best efforts, you are experiencing a partnership dispute, speak with an experienced business dispute lawyer early in the process. While the information on how to settle business disputes between partners above provides general information on some of the options available, ultimately, consulting a lawyer and discussing the unique circumstances at play will help you determine the best course of action.
Trusted Business Lawyers in Oakville Advise and Represent Clients in Business Disputes
At Campbells LLP, our business dispute lawyers have been helping businesses and business owners since 1999. Our lawyers provide practical advice to clients on a range of litigation matters, including business disputes and various commercial litigation issues. We take the time to understand your business before helping you decide on a course of action. To arrange a consultation with a member of our business law team, contact us online or call us at 905-828-2247.