Avoiding a messy corporate divorce

When business relationships go sour, the complexities involved in separating from a business partner can be difficult to deal with alone, particularly if there are legal issues at play.

A “corporate divorce” can be as emotionally charged and legally complicated as a personal one, especially when casual agreements and handshake deals were the foundation of the partnership.

However, with careful planning and professional guidance, a corporate breakup doesn’t have to be messy.

What is a “Corporate Divorce”?

A corporate divorce refers to the separation or breakup of business partners, shareholders, or stakeholders within a company, it is in these instances that business dispute solicitors can help with resolutions. This can happen for a variety of reasons, including strategic differences, personal conflicts, or simply the natural end of a business relationship. 

Much like a personal divorce, a corporate divorce often involves negotiations over assets, liabilities, and the future of the business.

In the absence of formal agreements, these breakups can become especially challenging, similarly to what we deal with with our clientele. 

Without clear documentation, like Shareholders Agreements, separating business interests can be time-consuming, confusing and ultimately, emotionally draining. However, these circumstances aren’t as far-fetched as they may seem.

From contracts written on napkins to handshakes sealing the deal, there are some things that can make for a grey area. That being said, how do you handle separating from a corporate relationship with ease?

Separating with Ease: Key Steps for a Smooth Corporate Divorce

As tempting as it may seem shaking hands on a deal that isn’t quite legit on paper, we would suggest you get a shareholder agreement sooner rather than later so your fate is in black and white. 

This way, you can avoid the separation that comes after a rocky business relationship. Nonetheless, if you find yourself in this position, here are some tips on smoothing out the process.  

#1 Seal Agreements Early On

One of the most critical steps in avoiding a messy corporate divorce is having clear, legally binding agreements in place from the beginning of the partnership. A well-drafted Shareholders Agreement or joint venture contract outlines roles, responsibilities, and the exit strategy in case things go wrong. As Ian Pearl, a partner in our Litigation Team, explains “Prevention is far better than cure”.

#2 Remove Emotions from the Equation

Business breakups often become personal, leading to emotional decisions that can cloud judgement.

This is why commercial dispute solicitors exist, as it’s crucial to focus on the commercial interests and what’s best for the business, just as we did in a recent case where our client successfully extricated themselves from several casual joint ventures. Our objective was simple: remove emotions from the transaction and find the most commercially beneficial solution.

#3 Seek Professional Legal Help

In complex business breakups, seeking legal help is vital from the likes of shareholder dispute solicitors. Solicitors that specialise in corporate litigation can offer guidance on how to split assets, resolve disputes, and ensure a clean break.

Professional advice can be instrumental in drafting the agreements needed to avoid costly and drawn-out disputes, just as we helped our client achieve in an extremely short amount of time during their corporate divorce.

How Business Dispute Solicitors Can Help You Avoid a Messy Corporate Divorce

The good news is, competent shareholder dispute solicitors are experienced in corporate litigation which can help you navigate the path of a corporate divorce, especially if agreements were never formalised. 

Solutions would utilise the likes of negotiation and mediation, this can help drive the focus onto the commercial aspect of things, rather than the emotion which is what can take over should there not be the inclusion of business dispute solicitors.

Similarly, you must keep yourself protected. In order to do this, it is important that you have the right people on your side, particularly if litigation is required. Having a competent business dispute solicitor representing you during a complicated company dispute makes for a much more seamless process than the latter.

The Bottom Line

The bottom line is, there is no ‘nice’ way of separating yourself from a company, particularly with emotions involved. However, it is important to do it the most stress free way possible, to do this, shareholder dispute solicitors are the best kind of team on your side. 

If you’re looking for a competent solicitor to help you see through your case, get in touch with us at BBS Law today.

Case Study: ‘Corporate Divorce’

Our Litigation Team led by Ian Pearl recently helped a client enter into a “corporate divorce” after they had entered into several casual joint venture agreements mostly done on a handshake and recorded on the back of an envelope. These arrangements made it nearly impossible for our client to extricate itself from the web of casual arrangements that had built up over the years and led to frustration on all sides.

Our team was able to complete an agreement with the other side which resulted in a complete split between our client and its former business partner.

Although the disputes had been rumbling on for a while, we were able to reach an agreement in an extremely short amount of time by maintaining an unrelenting focus on our client’s needs. Our objective was to strip the emotion out of the transaction and concentrate on what would be the most commercially beneficial solution for our client. An important skill for any litigator.

Partner, Ian Pearl commented:

“Our client was thrilled with the outcome. However, this scenario highlights the need and value of entering into a formal carefully drafted Shareholders Agreements at the outset of the business relationship.  Prevention is far better than cure”.

If you would like any further help with Shareholder Agreements please contact our Head of Corporate Dov Black or if you have a dispute we can help you with please contact Ian Pearl who is a partner in our Litigation team.

Frequently Asked Questions

What happens if I don’t have a Shareholders Agreement?

Without a Shareholders Agreement, you may face significant legal hurdles in a corporate divorce. This lack of clarity can make it difficult to determine how assets should be divided, who controls decision-making, or even how to exit the business. Simply ‘just walking away’ may have consequences, so it is important to have solicitors on your side.

Can I still separate from a business partner if the agreement was informal?

Yes, it’s possible to separate even when agreements were made informally, such as via handshake deals. However, it may require more negotiation and legal intervention. BBS Law can assist by creating a formal agreement during the separation process, ensuring that both parties’ interests are addressed.

How can I prevent disputes with my business partner in the future?

Prevention starts with having a comprehensive Shareholders Agreement or partnership contract in place. This formal document should outline roles, responsibilities, exit strategies, and dispute resolution processes. Regular communication and transparency between partners also help prevent misunderstandings and conflicts.