Key Harrington Barnes, PC

Effectively handling ineffective partners

Some Texas business owners are well aware of the frustrations and setbacks that can occur on account of a non-performing business partner. For corporations, in which many of decisions are made via majority voting among shareholders, a partner whose demonstrably lackluster performance is effectively deterring essential business efforts can be overcome by persuading the majority of voters that a course of action nullifying the ineffective partner's ways is best for the business.

However, moving forward on a business move without the non-performing partner's consent is not always possible, especially when there is an even split in the shareholders' voting, The partnership rules of a business typically stipulate equal power between partners in such a situation, even if one partner owns the majority of the business.

In that case, overcoming the non-performing partner may be done through direct negotiation with a professional mediator and submitting the case to arbitration. Ineffectiveness and incompetence are often exposed in front of neutral third-party professionals, and this alternative method for dispute resolution may save substantial time and money.

Preemptive action may be taken to obviate disputes arising from a partner's ineffective or incompetent ways. By drafting a written agreement that contains provisions for efficient resolutions to partner disputes, including a buyout clause, the damage done to a business by a non-performing partner may be limited, especially if those provisions are adopted into the corporation's bylaws. In the event that the non-performing partner refuses to abide by the agreement's provisions, a lawsuit may be warranted.

Implementing the counsel of business law attorneys, the frustrated business partner's side in the dispute may prevail legally and definitively. These lawyers may also, beforehand, help outline in detail the written agreement and available strategies that can effectively overcome problematic partnerships.

Source: Houston Chronicle , "How to Deal With a Non-Performing Business Partner", Terry Masters, December 22, 2014

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