Revisit the Contract
Review the agreement(s) that you and your partner(s) originally entered into and refer to the clauses that deal with disagreements and departures of partners. Ordinarily, these contracts won’t account for every possible dispute that could arise. Nevertheless, they serve an important function and point of reference during any dispute resolution. A contract attorney can assist with this.
Try to negotiate
Don’t let your ego get in the way of a peaceful resolution. Stay cool, calm and collected when you negotiate and acknowledge your partner’s interest when devising options.
It’s not an enjoyable stage of any business – planning to dissolve a company. An exit strategy should be considered at the commencement of the business relationship. This will give both partners protection from the outset, and will mean all parties are bound by the agreed terms.
Identify mutual interests
At the end of a business relationship, it goes without saying that both you and your partner have your own reasons for severing ties. The idea is to identify each other’s mutual interests so that you can come to a fair and reasonable resolution. Mutual respect and cooperation goes a long way, no matter what the reason for ending the partnership.
Draft an ‘Exit Clause’
Right at the start of any business relationship you will want to flesh out an exit strategy. Draft a simple contract that contains an exit clause that applies to each of the partners. Or, better yet, have a contract lawyer with experience in business structures draft one up for the company. If it’s too late and you don’t have one, refer to the contract.
Do everything 50/50
It’s expensive dissolving a company. Share all the legal costs and base the division on the ownership percentage in the company. By sharing the expenses of dissolving the business, you can show that there was an agreement to end the company in case it is later disputed.
Honesty is paramount
Losing your partner can be difficult, but losing your money can destroy your business. Have an open-ended, honest discussion to vent any hard feelings. Identify what’s working and what isn’t, and make an attempt to reconcile with your partner. If salvaging the relationship is not an option, give each other an offer that you think will accommodate both parties. Your aim is to end the relationship amicably.
Don’t make hasty decisions
If you and your partner are in a heated argument, take a walk or get some fresh air before you say or do something you’ll regret. Plan how you’ll approach your partner. It’s important you don’t lose their trust.
Get legal advice
It’s always valuable to get professional legal advice from a law firm. It’s often a tumultuous time during the dissolution of a company, and by seeking the advice of a business solicitor, you can minimise the emotional involvement and hopefully arrive at legal and reasonable solution. If there are assets that need to be accounted for, both parties should be getting independent legal advice. This will allow the partners to fairly negotiate the final stages of the business without becoming blinded by resentment.
Identify mutual advisors
If the partnership is inevitably coming to en end, it’s not uncommon that both parties will distrust the other. If there is an advisory board, some trusted friends, or perhaps even family members that don’t have any financial interest in the company, they might help create an environment more conducive to open discussion and ultimately a solution. If this doesn’t work, bring the business lawyers to the meeting and have a negotiation.
Communication is critical
Without effective communication, everything collapses. During your partnership you should be communicating your goals and ambitions for the company, as if it were a marital bond. The more open and transparent the business relationship is, the less likely the need to introduce lawyers into the equation.
What will happen once you and your partner have ended your working relationship? Have you considered all of the consequences yet? It’s important that you have a plan in place for how assets and shares will be dealt with so that the transition is as smooth as possible. For instance, who will have access to the customer base? Prepare yourself with some answers after discussing with a business lawyer.
If you’re anticipating rocky waters with your partner, call LegalVision to get the best quality legal advice at a fixed-fee rate. End your business relationship on a good note, and give your assets their deserved protection by establishing at the outset of the business relationship a well drafted partnership agreement.