Imagine a ticking time bomb hidden in your business partnership that can destroy your endeavors at any time. If you have buy-sell agreements, it is only natural to think that such legal documents can defuse potential conflicts.
The truth is that a poorly crafted and executed buy-sell agreement can sometimes ignite disputes. Recognizing the common flashpoints for such claims is the first step in safeguarding your business interests.
Buy-sell agreements can also carry risks
Buy-sell agreements aim to protect all parties involved. Yet, certain situations often lead to disputes and potential litigation:
- Death of a partner
- Disability of an owner
- Retirement or voluntary departure
- Divorce affecting ownership
- Bankruptcy of a partner
- Breach of fiduciary duty
- Disagreements on company valuation
- Forced buyout attempts
One key issue often centers around valuation. When a triggering event occurs, determining the fair market value of a business interest can spark heated debates. California courts have established precedents for valuation methods, but each case brings unique challenges.
Another frequent source of conflict is the interpretation of agreement terms. What seems clear on paper can become murky in real-world situations. For example, the definition of “disability” in an agreement might not align with actual circumstances, leading to disputes.
Forced buyouts present another legal minefield. California law protects minority shareholders’ rights, which can complicate attempts to force out a partner. Courts closely scrutinize such actions to ensure fairness and compliance with the agreement’s terms.
Securing legal guidance can be crucial
When facing any of these triggers or simply wanting to understand your rights better, it is vital to consult with a legal professional. A vastly experienced business litigation attorney can provide the guidance you need to find the most effective path forward.