There are a number of structures for business ownership – partnership, companies, unit trusts among them – but if there is more than one person owning the business then there is always the chance of a dispute between them. Business owner disputes are one of the most frequent causes of business failure and litigation.
Business owner disputes can arise in many ways. Financial pressure if a business trades poorly can be one reason, but they are also common even when businesses are trading well.
Imagine this scenario : You have been a Director and Shareholder of a corporation for many years conducting a business. You have a co director who started the company and business with you. You each look after different divisions of the business. While both are necessary, the division run by your co-director is more profitable. Your co-director’s wife looks after the books of the company. Everything has been running smoothly since its inception, however, in more recent times you have noticed things changing.
You are experiencing a lack of transparency as regards the operations of the business and decisions involving the day to day management of the business. You are not being consulted about the day to day operations of the company and you are finding it difficult to get access to the company’s financial records. You feel as though the staff are disregarding your input and are concerned that you are being undermined.
You have reached a point of no return and want to exit the business and the company. You have put a substantial investment into the business and receive a very good salary. But your co-director thinks that the value in the business is from his division so he makes a low ball offer.
This is the common scenario that people face every day. Depending on the structure of the ownership of the business, you are not without rights and remedies in a situation where you are not in agreement with your co-owner.
The Corporations Act 2001 provides owners with a variety of rights and remedies in such circumstances including ownership disputes within a corporate structure.
Some of the remedies include the court making orders for the compulsory acquisition of shares owned by a shareholder at fair market value, and in drastic circumstances, the winding-up of the corporation to protect the interests of parties including creditors.
A winding-up of the company includes the appointment of a liquidator to undertake the orderly winding-up of the affairs of the company, including the sale of assets and payment of creditors.
There are a number of factors and strategies that must be considered in an ownership dispute and the best way to end it and move on. Such factors include:
1. If a company structure, the company constitution and shareholders agreements. If a partnership, the partnership agreement.
2. Employment contracts.
3. The financial circumstances and statements of the business.
4. The conduct of all parties including directors and shareholders.
5. Liability of directors for trade creditors and statutory obligations such as income tax, employee entitlements and the like including lease guarantees and finance facilities.
6. The ability to trade post termination of a business relationship.
7. How to obtain the best price for the sale of shares.
8. Remuneration payable under any employment contract.
9. Rights under sections 232, 233 and 461 of the Corporations Act 2001.
Furthermore at general law and in equity there are remedies for partners wanting to end their association and to have their partners account to them in respect of their dealings.
We are experts in this field and have acted for many clients in partnership and ownership disputes including those involving corporations, partnerships, unit trusts, and joint ventures.
With expert knowledge of the usual terms of security documents and the remedies available to lenders and borrowers, our litigation lawyers are ideally placed to provide effective representation in the event of a dispute. Our partner Justin Mathews has specialist accreditation in commercial litigation, and our partners Peter Muller and also Paul Box frequently act in disputes of this nature.
At QBM Lawyers we focus on delivering effective results to clients and have the management, support, and facilities to do so. We understand our clients’ aims, acknowledge their challenges and opportunities and are able to listen and respond to their commercial needs.