Partnership & Shareholder Disputes

Business Dispute Litigation and Lawsuits in Atlanta, Georgia

When new business partnerships and ventures begin, the parties are hopeful and looking ahead toward a successful venture. It is human nature to avoid thinking about and planning for legal problems that could arise later. For that reason, many business ventures fail to anticipate and prepare for disagreements that can threaten the viability of the business, professional practice or other enterprise. While certainly the case with handshake partnerships, poor planning can be true even when the parties enter into written partnership or shareholder agreements.

When disagreements do arise (as unfortunately they usually do), complex issues involving corporate, business and possibly tort law may be involved. It is important to consult with a qualified business litigation attorney experienced in handling partnership and shareholder disputes and business breakups as soon as possible before the problem becomes intractable and litigation is inevitable. Of course, the best time to avoid a legal dispute is to have a qualified business attorney draft appropriate agreements when a partnership or business venture is first formed. Click here for more information about contract disputes and how to avoid them.

Management and control issues

Many partnership or shareholder disputes center on disagreements over management decisions or control of the business. In most partnerships and corporations, day to day management of business operations including hiring employees, vendor relationships, marketing decisions, etc. is left to a general or managing partner for partnerships, and the officers (or directors) of a corporation. Major decisions affecting the business such as borrowing money, selling assets, entering into key agreements, etc. typically require the majority vote of all partners or shareholders. In two person partnerships and corporations where each partner or shareholder owns an equal share, disagreements about management decisions or control can become serious unless organizational documents contain procedures for breaking the stalemate.

Where a business venture is formed with proper written agreements in place, the parties’ rights and obligations should be clearly spelled out. The consequences of failing to do so could be catastrophic, especially for a startup or struggling business. Countless businesses fail due to a conflict between partners or shareholders that cannot be reconciled because the parties failed to anticipate how they would handle and resolve disagreements without disrupting the business. This is where an ounce of prevention is definitely worth the time and effort. Successful business owners invest at the start by hiring a qualified business attorney to provide legal advice and draft agreements to properly document the business’ legal structure, how it will operate, and what happens in the event of disagreement or withdrawal of a partner or shareholder.

For business relationships formed without proper legal documentation, the parties’ rights and obligations are determined by applying general principles of corporate and business law to the particular circumstances. For example, partners generally owe fiduciary duties of trust, honesty and loyalty to one another (see below). If one partner breaches his fiduciary duties to another partner, he or she may be liable in tort for provable damages that resulted from the breach. Each case and set of circumstances is unique, and requires proper factual investigation and legal analysis. If you believe a business partner has not been truthful or has acted in a way that harms your business interests, you should contract one of our qualified Atlanta, Georgia business litigation and partnership dispute attorneys to discuss your options.

Fiduciary duties, self-dealing, squeeze & freeze outs

Under Georgia law (and that of most states), partners in partnerships, officers and directors of corporations, and majority or controlling shareholders of closely held corporations owe other partners and shareholders fiduciary duties of honestly, loyalty and trust. These are the highest duties of care required by law. In the context of business and other legal relationships, fiduciaries such as partners, officers and directors and majority shareholders must act in the best interest of other partners and shareholders.

In Georgia, the decisions of officers and directors may be protected by the business judgment rule which shields officers and directors if they act in good faith based on the information available to them. The question of whether a corporation’s officers or board has acted lawfully or is subject to potential liability is complex, and requires a careful factual and legal analysis.

When a partner acts in his own self-interest to the detriment of another partner, or officers, directors or majority shareholders fail to act in the best interest of all shareholders, they may be liable for damages resulting from a breach of fiduciary duties. Examples of self-dealing are where a partner uses business income or resources (such as employees) for personal use, diverts business opportunities (such as new clients), hides or fails to disclose material information about the business, or takes other actions for his own personal gain to the detriment of the business or other partners or shareholders.

Other common examples of situations involving breaches of fiduciary duty is a “squeeze-out” where one partner or controlling shareholder attempts to force another partner or minority shareholder out of the business, or a “freeze-out” where a partner or majority shareholder seeks to exclude another partner or minority shareholder from the management of the business.

The Atlanta, Georgia business litigation attorneys at Brownstein & Nguyen have decades of experience representing individuals and businesses in a wide range of business litigation including partnership and shareholder dispute lawsuits. Our attorneys will meet with you, review your documents and discuss your legal options and business objectives to assess your best course of action. Our attorneys have a proven track record, both in and out of the courtroom, of achieving the best possible results for business clients, including in partnership or shareholder dispute cases. Click here to view examples of cases we have handled and notable results, and click here to see what our clients say about our experience and dedication in handling their claims.

If you or your business is involved or may become involved in a partnership or shareholder dispute, call or contact our experienced business dispute litigation attorneys in Atlanta today for a free consultation.