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Overview: Can My Business Partner Push Me Out of the Business?

In this article, Toronto business lawyer, Antonio DiMinno, of DiMinno Rizzi Lawyers, explores what to do if your business partner tries to push you out of your company. 

Business partnerships are like marriages. They start with high hopes and shared dreams but can sometimes sour due to conflicts and disagreements. In extreme cases, these disputes can escalate to the point where one partner tries to push the other out of the company. If you find yourself in such a situation, it’s essential to know your legal rights and take appropriate steps to protect your interests.

 

What is Partner Lockout?

A partner lockout happens when one partner blocks another partner from participating in the company’s activities. Actions involved in partner lockouts can include:

  1. Restricting access to company bank accounts and financial records.
  2. Blocking access to the company’s website.
  3. Ignoring communication attempts from a partner.
  4. Altering locks and passwords to deny entry to the business.

Partner lockouts can have substantial consequences, encompassing financial setbacks, damage to the company’s reputation, and the potential for legal violations.

Can my Business Partner Push Me Out of My Business?

Legally, one partner cannot force another out of a business unless the partnership or shareholder agreement contains specific provisions permitting such actions. However, they can initiate discussions to encourage the other partner to voluntarily exit, often by offering to purchase their stake in the business.

Whether a partner can buy out another partner depends on what’s written in the partnership/shareholder agreement and the laws that apply.

For example, a buyout clause within the partnership/shareholder agreement allows a business partner to acquire the ownership stake of another partner. In addition, partners may have legal grounds to expel fellow partners from the business if they have violated the terms of the partnership/shareholder agreement.

What To Do If Your Business Partner is Pushing You Out

1. Review the Company’s Governance Documents

Start by examining the company’s governance papers. If the company is a corporation, then review the articles of incorporation, bylaws, and shareholders’ agreement. If a partnership, then review the partnership agreement. These documents lay out the rights and duties of the partners and often have procedures for resolving disputes. They may also include provisions to prevent partner lockouts or spell out solutions for such situations.

See our page on the Corporate MinuteBook and Shareholders Agreements

2. Understand Fiduciary Duties and Partner Rights:

Partners in a company owe each other certain duties, like acting honestly, being careful, and putting the company and its shareholders’ interests first. If one partner locks out another, they might be breaking these duties. Additionally, as a shareholder, you have specific rights, such as checking corporate records and participating in decision-making. If these rights are violated, it might be time to consider legal action.

See our page on Director & Shareholder Liability

3.  Consider Mediation and Arbitration

Instead of going straight to court, it’s often a good idea to explore other ways to settle disputes, like mediation or arbitration. These methods involve a neutral third party helping both sides reach a fair agreement. They can be faster and less expensive than going to court.

See our page on Arbitration & Mediation.

4.  Taking Legal Action and Seeking Solutions

If mediation or arbitration doesn’t work or isn’t an option, you might need to go to court to protect your rights. Depending on the situation, possible legal actions could include asking for a court order to regain access to company premises or records, filing a lawsuit for breaking fiduciary duties, or pursuing a corporate dissolution or buyout

How a Toronto Business Lawyer Can Help

In the face of partner disputes and potential business disruptions, timely action is paramount. To safeguard your business interests and minimize damage, don’t hesitate to reach out to our experienced legal team today. We’re here to provide the guidance and legal expertise you need for a swift and effective resolution.

 

Antonio DiMinno

647-205-9128

antonio@drlawyers.ca

Contact us today for a free strategy session!

 

Disclaimer: All number figures are approximate only and may be subject to change. Like all material on this website, this is not financial, legal, or tax advice. Contact a professional for your specific situation. 

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