Entrepreneurs generally put a lot of trust in their business partners. They expect their partners to honestly represent their intentions for the company and their personal abilities. They trust their partner to follow through on promises regarding investments and work performance. They also expect their partner to do what is best for the business at every opportunity.
Typically, executives and those with ownership interests in organizations have a fiduciary duty to the company. They should put the best interests of the business above their own wishes when operating the company. Unfortunately, not every business partner lives up to that standard.
Some people embezzle from companies. Others might offer overly generous contracts to a side company that they run or a family member who provides certain services. When one business partner has breached their fiduciary duty to their organization, the other may need to take legal action.
Litigation can help protect the company
Unless the initial partnership agreement has an ironclad clause requiring alternative dispute resolution, litigation is often the most expeditious solution for significant partnership disputes. When one partner truly believes that the other has failed to put the best interests of the company first, they can ask the courts to remove that partner from their role at the company.
In some cases, they may even be able to seek damages from their partner or ask the courts to enforce penalty clauses included in their agreement with each other. If a judge agrees that one partner has breached their fiduciary duty to the company and potentially caused it losses, they can issue an injunction preventing future misconduct and ordering a halt to certain inappropriate business activities.
A civil court judge can issue an order of specific performance requiring that one partner follow through on contractual promises made to the other. Depending on the circumstances, there are a variety of different viable solutions to a business lawsuit related to a partner’s misconduct. The sooner one partner acts, the better their chances of limiting the damage done to the business.
Successful partnership litigation often begins with a review of s partnership agreement and business formation documents. The terms included in those documents can help the partner initiating the lawsuit plan the best response to their partner’s failures. Exploring different solutions can help one partner to potentially mitigate the damage caused by the other’s misconduct.