COMMERCIAL INVESTMENT REAL ESTATE
18 January | February 2018
B
usiness breakups often involve bruised egos, emotional
sparring, and financial consequences. The complexities
of resolving professional disputes or dissolving a profes-
sional connection can make business relationships even
more fraught than personal breakups. The significant financial
and professional consequences for all parties involved can be even
worse, if not they are not planned in advance.
When disputes between business partners occur, having the
appropriate dispute resolution procedures in place minimizes the
financial risk and uncertainty. Clearly defining the contours of
the business relationship at the start can help manage expecta-
tions, set collective goals, and ensure that those involved have
the same understanding.
No matter how positive the outlook may be for a business
relationship at the beginning, circumstances change, resulting in
different perspectives, priorities, and preferences. From financial
challenges, shifts in the marketplace, or genuine personal or
professional differences between business partners, disputes can
arise in many ways.
Countering Deadlock
A deadlock is a specific type of dispute that occurs when business
partners cannot agree on one or more material issues affecting the
business, leading to company paralysis. To minimize the negative
impact of a potential deadlock, business owners are advised to
agree on a deadlock resolution mechanism when starting new
businesses or when a change in ownership structure occurs.
If a company's governing instrument does not outline agreed-
upon deadlock resolution mechanisms, the deadlock and fate of
the company will be subject to resolution by the courts. In the
worst-case scenario, the result could be a costly forced sale or
dissolution of the company.
Corporate management structures evolve over time. Don't
leave the fate of your company and its financial future up to
KTSFotos
Avoiding Deadlock
Advance planning minimizes the impact of business breakups.
by Ryan Olson
LEGAL
B R I E FS