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Taking action after a business partner’ breach of fiduciary duty

On Behalf of | Mar 27, 2023 | Business Litigation |

A business partner’s conduct can have a profound impact on someone’s financial stability and their career. Oftentimes, people expect their business partner to split the managerial workload at a startup and make certain goals more achievable. When business partners rise to the challenge, they can serve as invaluable assets.

However, a business partner can also cause substantial harm to a company and to a partner’s wellbeing. Truly unprofessional or incompetent behavior could damage a brand or diminish the value of company resources, and people may also abuse their role at a company to derive short-term personal profit.

There are many ways that a business partner could breach their fiduciary duty to an organization and to their partner. What needs to happen when someone suspects significant misconduct or failings on the part of a business partner?

A thorough investigation is critical

One partner making unfounded accusations after a single missing check or bad investment could permanently damage the relationship that business partners have with one another. Those who suspect misconduct from a business partner will likely need to tread carefully when looking into the situation.

A careful investigation into not just the specific incident but other similar scenarios at the company can help expose misconduct or incompetence. It can also help show whether or not there is a trend of problematic behavior. Finally, the partner concerned about the situation may also need to review company paperwork and partnership agreements to determine what steps to take next.

Direct negotiations or court may be necessary

There are numerous factors that determine the best approach to a significant breach of fiduciary duty by a business partner. In some cases, one partner may need the immediate intervention of the civil courts to protect the organization and its assets.

Especially when the partners have a pre-existing relationship, an informal discussion of the matter might be the best option. Sometimes, one partner may do something foolish and then later make up for it. Other times, they may double down on bad behaviors, forcing their partner to take drastic steps to correct the situation. Occasionally, it may be necessary to go to court and remove a partner from a leadership role at the organization or even dissolve the business.

Addressing the misconduct of a business partner through business litigation will typically require careful planning and professional support. It is important to seek legal guidance before committing to this plan of action, as it is a consequential approach and may not be right under all circumstances.