Business partners tend to agree to specific terms when starting their working relationship. They may negotiate a buy-sell agreement that allows one partner to purchase the other’s interest in the company in certain circumstances.
Those pleased by a company’s progress may want to continue working there and to maintain their ownership interest for future profits. However, the indefinite continuation of a partnership is not always possible if one partner insists on buying the other out in accordance with their contract.
If a partner refuses to uphold the terms of a buy-sell agreement, then litigation could help resolve the issue.
How can litigation help?
Litigation related to a buy-sell agreement could help validate claims of an actionable breach of contract or affirm one partner’s valuation of the company. A judge can also theoretically use specific performance to enforce the terms of the contract and move the transaction forward.
Generally speaking, litigation related to a buy-sell agreement involves a thorough review to ensure that the agreement is valid and enforceable. A judge may help facilitate the transaction or settle disputes that lead to the buyout offer.
In some cases, the partners may need to attend mediation or arbitration instead of litigating if the contract requires alternative dispute resolution. Ideally, litigation isn’t necessary when acquiring a partner’s interest in a company, but sometimes there is no alternative.
Reviewing a partnership agreement and the buy-sell agreement included in it can be helpful. A partner intending to invoke their right to acquire the company may need support while gathering documentation and communicating about the proposed transaction. If there is a dispute between partners about the sale of the company, litigation may be necessary to resolve the matter.
