Business partnership disputes

 

Partnerships are created when two or more people work together, sharing the profits and losses of a business.

Victorian legislation

In the absence of a formal agreement, partnerships are governed by the Partnership Act 1890. Although at the time it was drafted, the Act was a complete codification of partnership law, its provisions are now somewhat outdated.

It can no longer be relied upon to cover all eventualities that may arise in the modern day. It is important therefore that all partnerships should instruct a solicitor at the very outset to create an agreement which covers all eventualities.

If you would like to learn more about how to structure a business, visit our pages on alternative business structures.

Decision-making processes

Partnership agreements can help to avoid disputes arising in the first place by clearly structuring the decision making process. For example, clauses may determine:

  • What issues require a formal vote
  • How issues that do not require a vote will be decided
  • How many partners are required to vote
  • What should happen in case of a deadlock

This can be important even for small businesses as it avoids the ambiguity created by informality.

Dispute resolution

Business partnership disputes are considerably easier to solve if a comprehensive partnership agreement has been written. Although generally based around the same principles, they will change depending on the precise nature of the business.

Some disputes are more common than others and they can often be anticipated in advance and custom clauses drafted to assist with their resolution.

It is common to include an arbitration clause. These state that if the partners cannot agree on a point and there is no means of breaking the deadlock, they must appoint an arbitrator and accept their ruling. You can learn more about how this works by visiting our alternative dispute resolution pages.

Even in the event that the courts become involved, a well drafted agreement will help both sides to structure their case, leading to a swifter and less expensive solution.

If you would like to obtain legal advice on partnership disputes or any related issue, Contact Law can put you in touch with a cost-effective specialist solicitor free of charge. Please call us on 0800 1777 162 or complete the web-form above to speak to one of our advisors.

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