Starting a business with a partner requires you to have trust that your business partner will take just as good care of the business as you will as, more often than not, partners risk the entirety of their financial security in the promise of a successful.
Regardless of how well you know your Business Partner, there is inevitably always the possibility of dispute.
If your Partner starts to show signs of distrust in stealing your business, it is natural to feel anxious and stressed in considering how to resolve the dispute and protect yourself and the business. Stealing from your business can include misappropriation of money, taking physical items or intellectual property to name a few.
So what can you do if you find yourself in this situation?
Obtain legal advice
It is important here that you obtain legal advice as soon as possible and before you take any action yourself. Your legal adviser will be able to provide advice as to what to do to protect yourself, the business and to minimise the risk of damage and the risk of litigation that may be imminent as a result of your Business Partners actions.
It is important to recognise that stealing from a business can be classed as a criminal matter in situations involving fraud or embezzlement and therefore, it is crucial that you obtain legal advice from the offset so as to avoid being involved in such action and to take the necessary steps to report any criminal behaviour.
Ison Harrison offer a free 30 minute initial consultation which will be of benefit to you as soon as you become aware of any such behaviour.
Future proofing your business
It is an important reminder that disputes often arise due to a lack of direction and rules regulating the Partnership and not always because there is is ill intent to another partner. What one partner may deem to be ‘in the best interests of the business’ may appear to be detrimental to another business partner.
It is therefore vital that each partnership has boundaries and rules that govern the relationship so as to clearly define what a partner can and cannot do without the consent of the other. Having a clear guide in place will minimise any chance of dispute as the do’s and dont’s should be clearly outlined within the agreement. Failing that, a clear exit plan should be mapped out so that if all attempts to resolve the dispute fail, you can rely on a solid exit plan as a last resort to protect yourself and the business.
So what type of agreements are we referring to?
Partnership Agreement
If you and your Partner are entering into a partnership, it is strongly advised that you have a Partnership Agreement drawn up to outline the boundaries of the partnership.
Ison Harrison Solicitors have a team of experts who can draft and provide advice as to what bespoke provisions should be included in your Partnership Agreement depending on the nature of your business.
Common provisions that we would always recommend are included are –
- What the intended partnership split is to be between the partners;
- The duration of the partnership agreement and what notice is required to leave;
- If there is any money being introduced in to the partnership and if so the details of the individual introducing money and the amount they will be putting forward;
- If you wish to include a financial limit on withdrawal of funds for example, a withdrawal of £500 requiring the consent of all partners;
- How much each Partner can draw from the Partnership Agreement at what intervals and what happens in the event that a Partner draws too much from the Partnership Agreement for e.g are they required to repay the funds immediately with interest?;
- Post termination Restrictions – this may include a restriction on the outgoing partner not being able to talk to any employees and/or clients for a minimum period once they leave the partnership. Geographical restrictions are also common and beneficial so that partners are not competing in the same area for the same clientele;
- How the partnership may be dissolved.
Having the above answers mapped out clearly in a Partnership Agreement will inevitably leave less room for misunderstanding as to what each partner can and cannot do leaving you and your Business Partner to focus on more important matters to grow your business.
Breach of Partnership Agreement
If there is a breach of a Partnership agreement we can assist you in a possible claim for breach of contract which may include seeking:
- Damages in relation to financial loss;
- Seeking an injunction in relation to a breach of restrictive covenant;
- Forcing the other partner to leave the partnership.
If you would like Ison Harrison Solicitors to draft a Partnership Agreement for you contact Richard Coulthard (Director and Head of Corporate) on 0113 2845095.
If your business partner has breached your Partnership Agreement please contact Richard Coulthard (Director and Head of Corporate) on 0113 2845095.
Shareholders Agreement
If you and your partner are incorporating a limited company and will be shareholders, you will require a Shareholders Agreement instead.
The provisions we recommend you include in a shareholders agreement are in principal, similar to those set out above for a partnership agreement but you may have further duties and obligations to consider such as, fiduciary duties of directors (if you are directors as well as shareholders) and what happens to a shareholders shares if they leave the business?
Breach of Shareholders Agreement
If there is a breach of a Shareholders agreement we can assist you in a possible claim for breach of contract which may include seeking:
Damages in relation to financial loss;
Suspending voting rights;
Demanding a transfer of shares;
Seeking an injunction in relation to a breach of restrictive covenant;
Seeking an Unfair Prejudice Claim; and
Seeking a breach of fiduciary duties against a director claim.
Shareholders have rights to bring an unfair prejudice claim under section 994 of the Companies Act 2006 allowing a shareholder to seek relief in multiple situations but in summary where a shareholder is behaving in a way that does not promote the success of the company.
Further, a Shareholder who may also be a director has obligations to comply with the fudiciary duties as outlined in section 171 – 177 of the Companies Act 2006 which can also be summarised as obligations on directors to behave in a manner which will promote the success of the company.
The benefit of having an agreement in place
Having the relevant agreement in place will provide protection in so far as being able to pin point clearly where another partner has acted ‘in breach’ of the provisions of the agreement. Having an agreement in place will allow you to act quickly in the face of any breach and avoid you wasting time considering if a breach has in fact occurred in the first place thus, lessening the opportunity of further damage being made to the business.
Ison Harrison Solicitors have a strong commercial team who are able to draft both Partnership Agreement and Shareholders Agreement. The Commercial team are also provide advice as well assist in the face of any litigation.
If you are starting a partnership or a company or already in one without an agreement in place, it is strongly advised you get an agreement drawn up and put in place as soon as possible. To find out more, call Richard Coulthard (Director and Head of Corporate) on 0113 2845095.
If a dispute has arisen, please contact as soon as possible by contacting Richard Coulthard (Director and Head of Corporate) on 0113 284 5095. We can provide advice to you as to next steps and represent and advise you in relation to the same, whether in relation to disputes between partners or shareholders.
