How to Avoid Disputes in Business Partnerships

Conflict in officeWhile setting up a new business, you and your business partner are focused on important, exciting tasks to get the business on the ground, from conceptualising your branding and setting up social media accounts to fitting out your store. During these times, it’s easy to forget or avoid considering the future potential for disputes. But like any relationship, it’s a possibility you should realistically prepare for.

The best way of avoiding costly, lengthy and stressful disputes is to establish a shareholder’s agreement that clearly outlines the rights and obligations of each business partner. Whenever an issue arises, parties can refer to the shareholders agreement and follow dispute resolution procedures that are set out. This reduces conflict and ensures fairness should a dispute arise.

Important Clauses to Include

It’s important that your shareholders agreement clearly outlines ground rules around key areas that may become the source of a dispute. This includes:

  • Roles and obligations – A description of each individuals roles and responsibilities so everyone knows what to expect of each other.
  • Dispute resolution – Provides a step by step process of how to reach an agreement or compromise in the event of a dispute that everyone agrees on.
  • Termination – Details the way in which someone can remove themselves from the business or under what circumstances a partner can be removed.
  • Confidentiality – Sets out information that everyone is limited to disclose to third parties (e.g. client lists, trade secrets, financial records).
  • Restraint of trade – Prevents partners from poaching clients, competing with the business or exploiting confidential information in a way that benefits them.
  • Intellectual property – Ensures intellectual property like branding, trademarks, designs, recipes etc. created by any partners are assigned exclusively to the company.

Coming up with a dispute resolution process is often difficult. An experienced commercial law firm can help you write a shareholders agreement that is fair and looks out for everyone’s interests.

Practical Ways to Resolve Disputes

Every partner has their own interests in the business and may have their reasons for wanting to leave the business further down the track. If everyone is honest and shares their concerns and interests at the beginning, it’s easier to achieve a fair outcome should a dispute arise.

For example, would one partner buy another out? How would this process go ahead and at what price? Are departing partners entitled to any assets or intellectual property? It’s important to come to a mutual agreement about such things early and to keep a paper trail.

Need Advice or Assistance with a Shareholders Agreement?

If you’re starting a business or need legal advice for your existing company, speak to our experienced lawyers in Brisbane. As members of the Queensland Law Society, our lawyers will examine your individual circumstances and offer timely advice on the best pathway forward.

At Phoenix Law, we specialise in Family Law, Personal Injury Law, Migration Law, Commercial Law, Property Law, Litigation Dispute Resolution, Estate Planning, International Trade Law, Intellectual Property Law and Workplace Relations Law. We speak your language, with a team of multilingual lawyers ensuring our clients get the best possible understanding of Australian law. Call our law firm today on 07 3180 0908 or contact us online.