How To Resolve Disputes With Business Partners

• Published date: 12 May 2020
• Author: Gillian Carty
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Arbitration & Dispute Resolution, Shareholders
• Law Firm: Shepherd and Wedderburn LLP

Like any relationship, external pressures, concerns about finances and a lack of clear direction for the future can lead to disagreements. Trying to reach a consensus through dialogue is often the best route to a resolution but if that is not possible legal action may have to be considered. Before rushing off to court it is worth considering mediation as a means of alternative dispute resolution. In a mediation, parties will be legally represented and the mediator acts as an independent third party seeking to help negotiate a resolution of the issues in dispute. Mediation typically has the benefit of being cheaper and quicker than court proceedings. The current restrictions implemented due to the COVID-19 pandemic also mean that not all courts are operating as normal, leading to delays, and many mediators are offering to conduct remote mediation to ensure that disputes can be resolved while complying with social distancing requirements.

Understanding the alternatives, the legal remedies available and whether these are likely to be upheld by a court is at the heart of resolving the dispute, whether through mediation or litigation. The legal remedies available in a business dispute will often depend on the nature of the legal relationships between the parties.

Can I dissolve a partnership?

In both traditional and limited liability partnerships, the legal relationships will be governed by the terms of the partnership agreement entered into by the partners. If there is no partnership agreement, the general law will apply. Removal of one partner from the partnership is only permitted where this is expressly provided for in the partnership agreement. This will also likely set out the process to be followed to remove a partner, the level of compensation to be paid on removal and the term over which that compensation is to be paid.

If the removal is to be justified on the basis of breaches of the partnership agreement by one partner, it is essential to ensure that the process set out in the agreement is adhered to and is also fair. That could involve giving the partner to be removed the opportunity to explain or justify their actions. Getting the process wrong will invalidate the attempt at removal and may also give rise to a potential claim in damages against the partnership, which may only put further financial and personal strain on the relationships. Under the general law, a partnership can be dissolved by one party giving written notice of the intention to...