CALGARY PARTNERSHIP DISPUTE LAWYER

Contact Neufeld Legal PC at 403-400-4092 or Chris@NeufeldLegal.com

Partnerships, while offering many benefits, are also fertile ground for disputes due to the close working relationship and shared responsibilities. These conflicts can arise from various sources, often escalating if not addressed promptly and effectively, and made more difficult to resolve in the absence of a written partnership agreement (or joint venture agreement). As these potential partnership disputes exemplify, there is enormous value in having a comprehensive written partnership agreement, as well as seeking to resolve these disputes early on, with legal counsel, before they escalate in to costly protracted litigation, which rarely, if ever, has winners, only losers.

A. Financial Disagreements

  • Profit and Loss Distribution: Disagreements over how profits should be divided or how losses should be absorbed. This can stem from differing perceptions of contributions (e.g., one partner invests more capital, another more time).

  • Capital Contributions: Disputes about initial or ongoing capital contributions, especially if one partner feels they are contributing disproportionately.

  • Salaries and Compensation: Debates over how much partners should be paid, whether salaries should be equal, or if one partner deserves more for a perceived greater workload.

  • Reinvestment vs. Distribution: Conflicts about how much profit should be reinvested into the business for growth versus how much should be distributed to partners.

  • Mismanagement or Misappropriation of Funds: Allegations of one partner mismanaging company finances, making unauthorized withdrawals, or using business funds for personal gain.

  • Expense Allocation: Disagreements on how business expenses are shared or whether certain expenses are legitimate.

B. Strategic and Visionary Differences

  • Diverging Goals and Expectations: Partners may start with a shared vision but develop different ideas about the company's future direction, growth strategy (e.g., rapid expansion vs. steady growth), or risk tolerance.

  • Business Strategy Conflicts: Disagreements over core business decisions, such as product development, market expansion, marketing strategies, or investment priorities.

  • Leadership Style: Conflicts arising from differing approaches to management, decision-making authority, or how the business should be run day-to-day.

C. Roles, Responsibilities, and Workload

  • Poorly Defined Roles: A lack of clarity regarding each partner's responsibilities, leading to confusion, duplication of effort, or important tasks being neglected.

  • Unequal Workloads: One partner feeling they are shouldering a disproportionate amount of the work, leading to resentment and frustration.

  • Imbalanced Contributions: Disputes when one partner perceives another is not pulling their weight, whether in terms of time, effort, or bringing in clients.

  • Decision-Making Authority: Conflicts over who has the final say on certain issues, especially in 50/50 partnerships where deadlocks can occur.

D. Communication Breakdowns

  • Lack of Transparency: Partners failing to communicate openly and honestly about business operations, financial matters, or personal concerns.

  • Misunderstandings: Assumptions or misinterpretations of intentions due to ineffective communication.

  • Avoidance of Difficult Conversations: Partners avoiding sensitive topics, allowing issues to fester and escalate.

E. Breach of Fiduciary Duty or Partnership Agreement

  • Breach of Fiduciary Duty: When a partner acts in bad faith, pursues personal opportunities that conflict with the business's interests, fails to disclose material information, or misappropriates assets. Partners have a legal duty to act in the best interests of the partnership.

  • Breach of Partnership Agreement: One or more partners failing to adhere to the terms and conditions outlined in the formal partnership agreement. This highlights the importance of a comprehensive and well-drafted agreement.

F. Entry or Exit of Partners

  • Admission of New Partners: Disagreements over whether to bring in a new partner, their capital contribution, ownership percentage, or role.

  • Exit Strategy Conflicts: Disputes when a partner wants to leave the business, including valuation of their interest, buyout terms, or how to divide assets. This is particularly contentious without clear buy-sell provisions in the agreement.

  • Dissolution of Partnership: If the partnership needs to be dissolved, disagreements can arise over the liquidation of assets, distribution of proceeds, and settlement of debts.

G. Personal Conflicts

  • Personality Clashes: Incompatible personalities or working styles that lead to ongoing friction and tension.

  • Loss of Trust: Erosion of trust due to previous disputes, perceived dishonesty, or unethical behavior.

  • Personal Circumstances: Changes in a partner's personal life (e.g., divorce, health issues) that impact their ability to contribute to the business, leading to strain.

Many of these disputes can be mitigated or resolved with a clear, comprehensive partnership agreement (or joint venture agreement) that outlines expectations, roles, decision-making processes, financial arrangements, and dispute resolution mechanisms from the outset. Regular, open communication and a willingness to compromise are also crucial for maintaining a healthy partnership.

Providing strategic legal advice and direction to business partnerships and joint ventures engaged in commercial activities in Alberta, from partnership / joint venture formation to internal governance to contracts and business transactions to dispute resolution. Contact our law firm at Chris@NeufeldLegal.com or 403-400-4092 to schedule a confidential initial consultation for your business partnership or joint venture.

Joint Venture versus Partnership