Disputes concerning ownership and control of a business can quickly become contentious between partners. One partner may claim a larger ownership interest than another partner recognizes. Or, a partner might attempt to remove another from the business, transfer ownership interests without authorization, or make major decisions without the required approval. Regardless of the reason for the conflict, when an internal resolution cannot be reached, there may be no other option than to proceed to litigation to protect an owner’s rights.
Common Reasons for Ownership and Control Disputes in Business Partnerships
Ownership and control disputes in business partnerships can arise for a variety of reasons. Common reasons for ownership and control disputes that lead to litigation can include:
- Disagreements over ownership percentages: Partners may disagree about the percentage of ownership held by each person or whether someone has an ownership interest in the business at all.
- Disputes over management authority: One partner may claim the right to make decisions that another partner believes require consent or approval.
- Exclusion from the business: A partner may be denied access to the business, company records, financial information, or management activities.
- Unauthorized changes in ownership or control: A partner may attempt to transfer ownership interests, issue additional interests, or otherwise alter the company’s ownership structure without proper authorization.
- Disagreements over voting rights: Partners may disagree about who has the right to vote on major business decisions or whether a particular decision was actually approved.
- Disputes over governing documents: Partners might have differing opinions about the meaning or enforcement of a partnership agreement or other governing document.
Disputes can also arise when there is a deadlock over decisions affecting a company’s management or future. Partners with equal, or substantially equal, ownership or voting rights may reach an impasse over a significant business decision, leaving neither partner with sufficient authority to control the company’s direction or make decisions without the other’s agreement. In addition, conflicts can occur over whether one partner has the authority to act unilaterally, whether a particular decision requires the other partner’s consent, or how the business should proceed when owners do not agree.
When is Litigation Necessary to Resolve an Ownership and Control Dispute?
Ownership and control disputes in a business partnership can significantly affect both the company’s operations and the value of an owner’s interest. When partners cannot settle an ownership and control dispute through negotiation, mediation, or arbitration, litigation may be necessary to determine each partner’s respective rights and protect the business. Pursuing litigation may also be particularly important in situations where a dispute cannot be resolved without a formal determination of the parties’ rights.
Judicial intervention may be necessary when one partner’s actions threaten another’s ownership rights or the company’s assets. For instance, if a partner attempts to take control of the business and exclude another from management, there may be no alternative but to seek a resolution in court. Similarly, a partner may need to pursue litigation when another owner attempts to transfer ownership interests, make unauthorized changes to the company’s structure, or take other actions that could permanently affect ownership and control of the company.
The appropriate legal strategy will depend upon the nature of the dispute, the terms of the partnership agreement, and the circumstances surrounding the conflict. A business litigation attorney can best assess each partner’s ownership and control rights, determine whether a partner’s actions violated an agreement or applicable law, and identify potential claims and remedies.
What Remedies Are Available in an Ownership and Control Dispute?
The remedies available in an ownership and control dispute depend on the facts and circumstances of each case. Both monetary damages and equitable relief may be available, based on the claims asserted. In appropriate situations, a partner may seek injunctive relief to prevent another from transferring company assets, taking unauthorized actions, or interfering with the other owners’ rights while litigation is pending.
Other potential remedies may include an accounting of company finances, damages for financial losses, enforcement of an operating agreement or other contract, or relief concerning an owner’s ownership or voting rights. In some cases, the parties may pursue a buyout or other resolution that separates the business partners while allowing the company to continue operating.
Contact an Experienced Long Island Business Litigation Attorney
If you are facing an ownership and control dispute in your business partnership, it’s critical to have knowledgeable legal counsel by your side who can help you navigate the litigation process. At Barnes & Barnes, P.C., we offer reliable representation and adept advocacy for a wide range of commercial matters across Long Island, including ownership and control disputes. Contact us at (516) 673-0674 to schedule a consultation and learn how we can assist you.
