Disputes with a former business partner

A dispute with a former business partner often combines ownership, management and money issues. Identify the legal structure before choosing a claim or procedure; different disputes may fall under different pre-action arrangements. ^[1]

Separate the capacities in which each person acted Establish whether the relationship was a partnership, company shareholding, employment or an informal collaboration. A person may occupy several roles with different rights. Gather the partnership or shareholder agreement, accounts, loan records and exit correspondence.

Distinguish personal claims from claims belonging to the business. An alleged diversion of company money does not necessarily create a personal debt to another shareholder.

Protect continuity while resolving the exit Identify access to bank accounts, customer records, premises and operational systems. Preserve evidence and seek advice before changing access, transferring assets or contacting customers about allegations. Emergency protection may require a different response from negotiating the exit price.

Review the entities involved and consider how ongoing business operations will be managed. Any settlement should address ownership, outstanding balances and the precise claims released, rather than relying on an informal statement that both sides will move on.

Identify the legal relationship behind the personal dispute Describe how the business was organised and the roles each person actually held. A partnership, company shareholding, employment relationship and informal collaboration can create different rights. One person may also be a director, lender or property owner. Record those capacities separately and provide the agreements or other evidence supporting them. The label business partner may explain the personal history, but it is not precise enough to determine who can claim a payment, control an asset or require an exit on particular terms.

Prepare a chronology of changes in ownership, management and contributions. Include relevant share transfers, loan arrangements, agreements about profit and correspondence concerning departure. Distinguish what was documented from what was discussed informally. If the parties remember an oral agreement differently, identify the surrounding records rather than presenting one recollection as settled fact. This gives the adviser a basis for assessing the relationship as it developed, including whether the present dispute concerns an original bargain or a later change that was never clearly recorded.

Reconcile contributions, drawings and alleged debts Create separate schedules for capital, loans, payments for shares, remuneration and other transfers. Identify the payer, recipient, date and evidence describing each transaction. Do not combine everything one founder contributed into an assumed personal debt owed by the other. The business entity may be the relevant debtor or rights holder, and accounting labels may need examination against the underlying agreement. Ask the adviser and accountant to clarify genuine inconsistencies rather than choosing whichever description produces the preferred exit figure.

Examine alleged misuse of assets with the same discipline. Identify the property concerned, its owner, the act complained of and the evidence available. A claim relating to company property may belong to the company rather than an individual shareholder. Explain the individual's practical loss without assuming that it automatically creates a personal cause of action for the same amount. Questions about standing, remedies and procedure should be assessed before a demand is drafted, particularly where several roles and entities overlap.

Protect continuity through authorised measures List systems, premises, accounts and customer records needed for ongoing operations. Identify who controls access and any immediate risk supported by evidence. Seek advice about proportionate protective action and preservation. Do not assume that a personal falling-out permits unilateral asset transfers, use of another person's credentials or exclusion from systems irrespective of legal rights. The business may need urgent measures, but the authority, purpose and effect of each should be understood before it is taken.

Consider a limited interim arrangement for necessary work while ownership or management is disputed. Identify who handles orders, payments and communications, and how the arrangement's scope and duration will be recorded. Staff and customers may need practical contact information without receiving contested accusations. The applicable pre-action process depends on the actual claim; an operational agreement should not be mistaken for a complete legal resolution or an automatic suspension of deadlines. Keep the two issues coordinated through appropriate advice. ^[1]

Define the whole exit rather than only a price List the interests and obligations that a proposed settlement must address. Shares or partnership rights, loans, guarantees, property, access and continuing duties may require separate provisions. Identify third-party consents, including any lender or landlord whose rights are affected. An agreement between founders that one will take over a liability does not necessarily release the other from a creditor's claim. Have those dependencies assessed before describing the exit as financially complete or announcing that all ties have ended.

Review who can release each claim and which parties must approve the bargain. Specify completion steps and the evidence of changes to ownership, balances and access. Keep continuing commitments identifiable after the main exchange, including any agreed cooperation or restrictions requiring advice. A useful exit record should allow a future adviser to understand the legal and financial separation without reconstructing the personal dispute. That clarity helps prevent a new conflict arising from an overlooked loan, an unreleased guarantee or a system still controlled by the departing person.