Look‚ if you are a minority shareholder‚ member or partner – whether you own 10%‚ 25% or‚ even 50% – you absolutely know when things are going south and when a "partnership dispute is on the horizon. The tell tale signs (all typically involving your gradual isolation from the business‚ business records and decision making process) are easily noticed but‚ many times‚ ignored with the hope that a resolution will come about. However‚ based on my experience in this arena and the many hard working clients we have represented over the years‚ you need to know that at the initial stages of a partnership dispute and lockout‚ settlement is rarely (unless you are willing to give up your equity or accept pennies on the dollar) a legitimate option.
So What is the Next Step? Well I discuss the next step‚ steps and options in my book (The New Jersey Partnership DIspute Guide) – you can order a complimentary copy – but what I want to express to you in this post is that you need to be persistent and that your litigation strategy needs to be one that "keeps pushing". The next step‚ in all likelihood will (and‚ in most cases‚ should) involve the commencement of a highly accelerated lawsuit where your partnership lawyer seeks injunctive relief. This relief will seek access to books and records and‚ if possible‚ reinstating your role in the business.
Now‚ getting back to the "persistent" and "keep pushing". You need to understand that your partners – as in the typical lock out senario – will be looking to:
- Lock You Out of Your Business– This "lockout" process is a gradual process and (if you are reading this post)‚ in one form or another has probably already started;
- Freeze You Out of Your Business – After they "lock you out" they will try to freeze you out of the business assets. That is they may interfere with distributions‚ cut-off your corporate credit cards and terminate your salary. Why? To weaken you with the hope of squeezing you out.
- Squeeze You Out of Your Business – Your partners will hope that a "squeeze out" is the final stage. That is‚ after they get you out of the business and financially weaken you‚ they will look to buy you out on pennies on the dollar.
So What Do I Mean By "Keep Pushing"? – Both you and your lawyer need to adopt a litigation strategy that pushes you back into the business. This is not easy but‚ with persistence‚ can be done. That is‚ your attorney should be seeking a preliminary injunction that will (a) get you access to books and records‚ (b) stop your partners from diverting corporate funds or business‚ and (c) rebalance your negotiating position with your partners. This is no easy task and small victories can have a big impact. Consider that many Courts will be willing to give you access to your own books and records. Once you get this access‚ you should seriously discuss with your lawyer the value of bringing in a forensic accountant.