Partnership Problems & Disputes

Partnership Disputes can be damaging to any business and in the most serious cases, a dispute between partners can even lead to the termination of the partnership and the company being wound up.

A Partnership Agreement will hold many of the answers to the way in which partnership disputes should be handled, as these agreements contain terms regarding:

  • Permitted acts
  • Non-permitted acts
  • Partner expulsion
  • Business dissolution
  • Buy-outs

But Partnership agreements are sometimes open to interpretation.

In some cases there is no signed agreements at all.

Frequently, partner disputes arise because one or more partners consider that another partner is not pulling their weight, or is taking an unfair share of profits leading to one or more partners leaving the partnership either by serving notice, or by expulsion.

This may lead to a claim for damages or other relief, for example:-

  • an account of profits;
  • forfeiture of fees;
  • compensation for losses caused to the partnership for breach of fiduciary/contractual duties;
  • an injunction

Outgoing partners will seek to enforce their right to be paid all profits rightfully due to them under the terms of the partnership agreement.

Many partnership agreements contain a clause which gives the partnership/other partners the right to expel a member (regardless to the fact that the member is not in breach of any provision of partnership agreement) if the majority of the members think that it is in the best interests of the partnership to do so.

The courts will be concerned to see that where such a power is exercised, it is exercised in good faith. So it should not be exercised for the personal benefit of one or more partners or for reasons unconnected with the business.

However, in exercising such a power, principles of natural justice will apply in that proper investigation needs to take place and the member who is to be expelled must be given a right to address concerns, to be heard upon them and to make representations.

Another area of potential dispute as between partners is unlawful discrimination.

Partners are not employees, and consequently do not have the protection of the Employment Rights Legislation.However, they are protected against unlawful discrimination on the grounds of:

  • Race
  • Disability
  • Sex
  • Marital Status
  • Civil Partnership
  • Gender Re-assignment
  • Pregnancy or Maternity
  • Sexual Orientation
  • Religion and Belief

The partners may agree as between themselves in the partnership agreement to provide further rights – for example the right to maternity leave, and to paternity and parental leave.

We are able to offer practical advice to resolve disputes by negotiation and using mediation which is quick and relatively inexpensive. Where necessary we will provide representation for clients in?? court proceedings

If you would like to discuss your partnership issues please call on 01872 302342 or email us and we will call you

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