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How to handle a contested business buyout without closing down

On Behalf of | May 9, 2023 | Business and Commercial Law

A business buyout is a bit like a divorce. One partner wants to end or at least change the context of the relationship. They offer to share the assets with their partner but seek to move on without any formal legal ties between the two of them.

A buyout is a viable option for someone who wants to take their business in a different direction than their partner currently intends or who worries that their partner isn’t bringing much to the table anymore. Like a divorce, a buyout could very well become emotional and contentious. The partner hoping to keep the company may have a hard time putting together an offer that seems appropriate to the other partner.

How do people resolve contested buyout scenarios without giving up on the company they formed?

They review and enforce their agreement

Many partnership agreements include a detailed plan for what will happen at the end of the agreement. There may even be a clause requiring one partner to permit a buyout in certain scenarios, provided that the offer meets certain standards.

Reviewing the contract can help a partner ensure they meet those requirements when making an offer, and then they can move forward with negotiating or possibly initiating litigation over the proposed buyout. The contract will often determine the outcome in court.

The agreement between the partners is often the most important consideration when attempting to predict the outcome of their dispute. Even if the partners can’t seem to agree mutually to uphold their initial agreement, that will be what a judge expects them to do when they go to court unless the contract doesn’t include any terms about the end of the partnership or is invalid for some reason.

If the contract includes specific rules for a buyout, a judge can potentially enforce the contract by requiring that one partner follow through with that initial agreement and accept an offer that is appropriate and reasonable given the circumstances. Ideally, business partners trying to propose a bio can potentially adjust their approach after an initial failure to try to negotiate with their partner rather than taking the matter to court.

Recognizing that litigation may be necessary and being fully compliant with all legal and contractual obligations are both important for those preparing to end a current business partnership in the hopes of retaining the business themselves.