There are many reasons why business partners may choose to end a partnership arrangement. Perhaps one partner has failed to follow through on their promises regarding investments in the company or job performance.
Maybe the partners had the same vision initially, but now their ideas for the future have diverged significantly. There might even be issues with inappropriate conduct such as self-dealing or outright embezzlement. When such issues arise, one partner may determine that the best path forward is to buy out the other. Instead of dissolving the company, they seek to acquire their partner’s interest in the business.
In theory, a partnership buyout can be a mutually beneficial arrangement. One partner receives compensation and the other maintains control over the organization that they formed together. Unfortunately, not every business partner is receptive to unexpected buyout offers.
How can a partner seeking to acquire sole ownership of a business handle a dispute about a buyout?
Review the initial agreement
The partnership agreement initially executed by the partners may establish clear procedures and standards for a buyout scenario. If the offer did not conform to those standards, then making adjustments and presenting the offer again could resolve the issue.
Other times, they may need to make a more compelling argument, possibly by presenting information about their plans for the company in the future or confronting a partner with evidence of their prior misconduct. If they still refuse to accept the buyout, then legal action may be necessary.
Ask the courts for support
If the initial partnership agreement provides specific standards for a buyout scenario, then a judge can help resolve the dispute by upholding the terms of the contract. Litigation could also potentially result in more favorable buyout terms in some cases.
Partners dealing with embezzlement self-dealing or wasteful spending of business funds can hold the party engaging in financial misconduct accountable in some cases. The possibility of a judge facilitating the transaction or imposing financial responsibility might motivate a partner to negotiate when the lawsuit is still pending. They may agree to a sit-down negotiation session or mediation as a way to resolve their disagreements about the buyout proposal.
Having the right approach during a partnership conflict can help people preserve their interest in a company. Partners who review their contracts and then come to the table with the right support can improve their chances of a positive outcome to a frustrating buyout scenario.