Business partners may be friends, college classmates, former co-workers or even family members. They often believe they know and can trust one another. Partners agree to make certain investments and perform specific work to develop a thriving organization together. Business partners generally have a fiduciary duty to one another and to the company that they established cooperatively. They should put what is best for their company first when making decisions in a professional capacity.
Unfortunately, in some cases, one business partner might have reason to believe that the other has violated that duty. What happens after a breach of fiduciary duty?
Documentation is necessary
To prove that a breach of duty actually occurred, a concerned partner must gather documentation. Evidence of embezzlement or self-dealing, records of incompetent resource management and proof that one partner has failed to do what was necessary to uphold the company’s best interests can help them validate that their partner has failed to fulfill their duty.
A buyout might be appropriate
It could be very difficult to continue working with someone who has proven incompetent or untrustworthy. A buyout may be necessary to protect the organization.
In cases involving a partnership agreement that contains a pre-existing buy-sell agreement, that process could be relatively simple. In scenarios where there is no pre-existing agreement and the other partner does not want to sell their interest in their company, litigation may be necessary.
Those facing significant disputes with a business partner may need guidance as they negotiate or prepare for litigation. Consulting with a business law professional can help people protect their companies from the misconduct or questionable decision-making of a business partner.