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Why You Must Look at Your Shareholder Agreement Differently when Faced with A Shareholder or Partner Dispute

Date: 12/30/2011 | Category: Partnership Disputes | No comments

When faced with a partnership or shareholder dispute‚ your shareholder agreement / operating agreement takes on a whole new life.  That is‚ rather than serving as the governing document to manage your continued and on-going business relations‚ it may now serve as either an impediment or asset to the wind-down or dissolution of your partnership relationship.

There are many shareholder or operating agreement clauses that may be relevant to your dispute‚ such as:

  •  Provisions pertaining to non-competition;
  •  provisions pertaining to dissolution or wind-down;
  •  provisions pertaining to a triggered buyout of one partner or shareholder; and 
  •  provisions pertaining to valuation.
Although this may sound counter intuitive but even if you want to trigger a dissolution‚ partner buyout or business valuation‚ sometimes‚ it is best to avoid directly pursuing this rights under your shareholder or member agreement.  

Why? Because many times there are unintended consequences and based on the traditional structure of the more common New York and New Jersey partnership agreements‚ triggering these events may reduce your negotiating leverage.  For example‚ rather than having your partner account for a breach of his or her obligations to your business‚ your partner may now "sit back" with his or her attorney and simply demand payout based upon a buyout event that you triggered.  So always be cautious and clearly plan out your strategy with your lawyer before you start invoking remedies contained in your shareholder or membership agreement.  Always be cautious about triggering a dissolution or buyout.

To Learn More about Business or Partnership Disputes‚ Contact Partnership Lawyer Charles N. Internicola at 800. 976. 4904

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