WHEN PARTNERSHIPS GO WRONG
Good relations can sour with disastrous results when you choose business partners unwisely.
We persuaded one of our valued clients to share the lessons he learnt from a bitter experience—
“I was not thrilled when my father asked me to work for him. However, I understood that he was getting on in years and needed me to take on some of the responsibilities in running the business. This was the driving force behind my decision to leave my previous job and join the company.
I asked for shares as I felt his business partner never honestly shared my father’s business philosophy or values. Unfortunately, my father died of a heart attack only 2 years after I joined him in the business. Even though I was now the majority shareholder, things went awry very quickly after my father’s death.
On the day of my father’s funeral, his partner had a secret meeting with our competitor to try to sell the company from under me. When I found out about the meeting, I refused to cooperate in the sale discussions. Instead, the partner tried to force the sale through legal action using every trick in the book, from mismanagement and abuse of power to shareholder oppression.
On the day of my father’s funeral, his partner met with our competitor in secret to try to sell the company out from under me. When I learned about the meeting, I refused to participate in the sale negotiations. Instead, the partner tried to force the sale through legal action using every trick in the book, from mismanagement and abuse of power to shareholder oppression.
Because of this, I was forced to spend time and money becoming entangled in a litigation that lasted well over three years when I should have been concentrating on growing the firm instead.
In retrospect, there are a few things I could have done, or should have known, to save me grief –
- You can never be sufficiently prepared to deal with a shareholder who maliciously asserts their shareholder rights in order to cause problems. Knowing your existing shareholders’ rights will enable you to stand firm in the face of allegations of wrongdoing.
- You can give key employees ownership interests in the company to enable them to participate in the growth of the company without giving them potentially abusive rights to complete legal ownership of the company.
- Avoid engaging in counter-offensive action as much as possible. Your restraint will earn you the respect of key employees and other corporate directors (if any); their support and assistance will be invaluable during these trying times.
- Be prepared. More than any other time, you need sound and trusted legal counsel on your side.”