Topic: Business Planning
Last month, I wrote about the not so odd couple – business divorce. In continuing my educational efforts and with the hope we can help folks in business avoid some of the most difficult issues faced when breaking up with a business partner, I am continuing my blog series on Business Divorce….
Business Divorce comes in many forms but has one common characteristic — the owners are at odds, or in agreement, and want or need to attend to the separation of their business interests. The typical reasons include, but are not limited to:
- Generational transitions;
- Owners are deadlocked on a material matter preventing the business from moving forward;
- The owners have different visions for the future;
- One or more owners needs or wants to cash out;
- A partner has become disabled or divorces and there are no contractual provisions which are triggered;
- One of the owners of a business is divorcing or separating from his or her spouse or life partner, which triggers one or more clauses in governance documents of a company;
- An owner becomes a debtor in a bankruptcy;
- An owner has committed fraud or has taken corporate assets as their own without the consent of other owners;
- An owner manager has committed waste;
- An owner is no longer contributing or supporting the business as part of management or financially.
When these matters come to me as a lawyer, I still deploy my mediator skills to seek an amicable resolution whenever possible. As a mediator, I employ my extensive knowledge of business law and my creative energy to find middle ground that brings the matter to resolution. As an attorney and mediator, I look to the governing documents (Bylaws, operating agreements, partnership agreements, shareholder agreements, actions by the Board and Management …. ) and governing law to advise my clients and to navigate the often treacherous waters.
I am often surprised that lawyers and clients have failed to address some of these items up front when creating the business. My clients know that we always discuss the “Parade of Horribles” when drafting governing documents, with the hope of avoiding undue conflict at the time the business is sold or owners separate.
In future articles, I will focus on the specific concerns that arise in business divorce and ways in which owners might avoid these issues with some up front planning.
Rochelle Friedman Walk continues her series on business divorce by adding some definition to the concept. She addresses the typical causes for business divorce and points out that is maybe mutual and not always adversarial.