I am fighting with my business partner. Can I walk away and start again?

This article first appeared May 24, 2010.

Dear Aunty B,

I started an IT support and maintenance company with a mate around three years ago. We are both equal shareholders.

Besides us, we have three full-time employees and two casuals. Things have been going quite badly between us recently, with accusations of stealing, continuous disagreements and workload not being fairly shared. I am considering getting out of the business and starting my own in the same field.

Knowing that two employees will follow me if I ask, as well as at least 60% of our customers, can I do it?

Gavin

Dear Gavin,

Of course you have reached into your drawer and pulled out your shareholders agreement and found that part that stipulates how you behave if one of you wants out. No shareholders agreement? Hmm…

I mentioned your question to our legal adviser Peter Vitalie and the hairs went up on the back of his neck. Field day for lawyers and courts, he says.

You see, you would be breaching a raft of statutory duties and potentially be in breach of a range of duties to act in good faith and in the best interests of the company as a company director.

There is a potential for serious criminal offences to be committed in this scenario.

One of the reasons those laws are in place is to stop fellow investors being relieved of their investments without appropriate compensation.

Even if you hate your business partner’s guts, the short answer to this one is that there should be a negotiated and organised separation of the business interests.

Finish it the right way: so a bad ending doesn’t hang over a new beginning.

Good luck!
Your Aunty B

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