When A Business Dispute Occurs, What Should Individuals Do First?
Before leaping into a confrontation, a business partner dealing with an issue with their partner should take a deep breath. Immediate confrontation usually is a mistake. Instead, do some research. Read over the company handbook, the shareholders’ agreement, and the company’s formation documents. It might also make sense to look at the operating agreement for information pertinent to the dispute.
These fundamental documents offer relevant information, such as:
- How is the company currently managed
- Who owns the company
- How ownership is divided
- Who has the rights to certain profits
- Other information specific to the type of business
Some operating agreements contain rules and regulations about business disputes, which will also be handy.
After reviewing the company’s rules and provisions is time for a little self-reflection. It might help to take some notes at this point as individuals work through these questions and figure out how they can better identify the issue. Here are some basic questions about general disputes to get individuals’ thoughts flowing:
- Is the offense egregious enough to consider selling the company?
- What resolution would be optimal?
- Is buying out the problematic partner an option?
- How can present or future losses be prevented?
- Are there company resources at stake? What are they?
- What actions have created the dispute?
- What are the individual’s main concerns?
- What actions has the individual taken to deal with the problem?
- Does the individual want to keep working with the current business partner, or do they think it is best to separate?
- Does the individual want to minimize conflict so they can preserve the relationship with their partner?
- Does the individual see hope for the future, or is the situation beyond resolve?
- Has any important company information been leaked?
- Has company funding been compromised?
Depending on the nature and gravity of the dispute, it may now be time to contact an experienced attorney for help with the problem. The answers to these questions will hopefully clarify the situation and make it easier to move forward confidently.
After Doug does some thinking, he realizes that things could be worse. He and Patrick are old friends, and though he is upset with the differences in how they approach the job, the business is still doing well. So Doug decides to set up a meeting with Patrick and tell him how he feels. Doug knows Patrick well, but he knows that Patrick has a temper. So Doug decides to bring not only his notes to the meeting but have one of their longtime employees act as a mediator in the dispute.
How Should Individuals Approach Their Business Partners in the Event of a Dispute?
Individuals need to be prepared before approaching their business partners. As opposed to surprising them, schedule a meeting. This strategy will make the interaction feel less like an “ambush” and more professional. Also, this will prevent the business partner from immediately growing defensive or emotional.
We suggest that before the meeting, individuals also:
- Be sure not to delete records (emails, texts, documents)
- Continue to perform typical work duties before and after the meeting
- Continue to meet legal duties and obligations
- Prepare to document the meeting, and let the business partner know you will be documenting the encounter
- Possibly schedule a consultation with an attorney so that the individual can report on the meeting’s results
When two business partners are involved in a dispute, it can be highly emotional. Therefore, it is important to continue with normal daily tasks instead of becoming caught up in the highs and lows of the situation.
In the days before he meets with Patrick, Doug makes sure to take care of all his normal work. He meets with clients and prospective customers, helps employees with questions, and orders new paper supplies as usual. On the other hand, Patrick spends much of his time daydreaming in his office and going out to expensive lunches. Since Patrick uses the company card for his lunches, Doug can document how much Patrick is spending, and he will bring a list of these exorbitant expenses to the meeting the next day.
How Can Partners Try to Resolve the Dispute Informally?
Doug has the correct idea: before involving a lawyer, it is usually best to sit down with one’s business partner and discuss the problem. Communication is usually the key to solving the problem, so speak clearly and honestly. Attempt to eschew emotion for rationality and tell the business partner:
- What the problem is
- Why is it impacting other people
- How it is negatively impacting the company
- What the proposal for change is
When a business dispute arises, sometimes the partner behaving poorly is unaware of the consequences of their actions. Sometimes, a meeting between two partners also reveals that the blame does not fall solely on one party. Honestly is the best policy in these situations, so leave the emotions at the door and communicate plainly and clearly. The use of evidence may also be helpful in the meeting, although one does not want their partner to feel as though they are being attacked.
Mediating the conflict is also often a smart choice. Having another party in the room for the discussion can encourage rational conversation. Also, a mediator can help highlight the main conflict and push the partners towards a thoughtful, intelligent solution.
Doug chooses Adelaide as a mediator. Adelaide has a business degree from Harvard and has been with the Brothers Do Paper since they first opened their doors, and she is known as a confident, fair person around the office. She is equally friendly with Doug and Patrick, but she is also known for her strong opinions. Doug knows that Adelaide will push back against himself and Patrick if needed; he also knows that Patrick respects Adelaide’s opinion.
The goal of the meeting is not only to resolve the conflict but to set a precedent and help prevent future disputes. Sometimes, after a productive meeting, the company decides to change its business documents to welcome new policies and regulations.
Overall, if individuals can view disputes as something that can make the business stronger and more productive in the long run, they are on the right track. However, this idea does not change the fact that disputes among business partners can be difficult and often require the help of a professional attorney.
When is the Right Time to Contact a Lawyer Regarding a Business Dispute?
Finally, when the time comes for Doug and Patrick’s meeting, Doug is ready. Adelaide, Doug, and Patrick meet in the conference room of Brothers Do Paper, and Doug begins by establishing his argument. Patrick, he says, is wasting time and money with his actions. Not only is he only really “working” for half of the day, but he is also spending far too much on lavish lunches while Doug eats Subway sandwiches and slaves at his desk.
Patrick is defensive at first, but he begins to see the light. He realizes that while he thought it was time to celebrate that the business was doing so well, he was wrong. You are right; he tells Doug; I will buckle down.
Patrick values his working relationship with both Doug and Adelaide, as well as their friendships. He resolves to change his client lunch strategy and return to working hard. After all, hard work led to the company’s success.
Doug is pleased but also learns a few things from the exchange. First, Patrick tells him that Doug is often short-tempered and unresponsive to questions. Patrick also thinks Doug can be more adaptable to new strategies.
Doug thanks Patrick and notes these ideas down. He realizes that the problem he was so upset about cannot only be pinned on Patrick; and that he is responsible as well.
The two old friends and successful business partners resolve to keep the lines of communication open and thank Adelaide for her time.
Ideally, all situations involving partner disputes end up like this one. However, this neat resolution does not always occur. At some point in the process of a dispute, you may realize that you need an attorney. Some business owners seek out the opinion of a legal professional, and others need to file a lawsuit for their business dispute.
When you need help with a business dispute at your company, contact Nakase Wade. Our California business lawyers and corporate attorneys provide expert guidance and can help you resolve your issues quickly. Even if the dispute is just beginning, discussing the issue with an experienced attorney can clarify and help individuals decide what to do next. At Nakase Wade, we offer free consultations, so contact our legal team today. We understand the nature of business disputes and know how to remedy them quickly. Good luck, and we look forward to speaking with you.
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