Business partners combine their resources, connections and capabilities to run a company together. Most of the time, both partners are diligent about acting in their company’s best interests and trying to make it as profitable as possible.
Occasionally, one partner begins to suspect that the other has put their own interests ahead of the business’s. In fact, they may have used their position to enrich themselves by doing business with an outside organization to which they have a connection. In scenarios where a business partner has engaged in self-dealing at the expense of the jointly-owned business, litigation may be necessary.
How can a lawsuit help?
Litigation may lead to a review of business records and the partnership agreement. The partner accused of self-dealing may be able to explain the situation. However, if the evidence shows that they breached their fiduciary duty to the organization and their contractual obligations to their partner, then there could be consequences.
The courts could declare the partner responsible for the financial impact of their self-dealing. The plaintiff partner or the organization could receive damages based on the losses generated. A significant breach of fiduciary duty could warrant the removal of a partner from an executive role.
In fact, it could provide the basis for a buyout. It may be possible to remove the partner from the company and allow the other partner to acquire their interest in the organization. The courts could also potentially issue injunctions preventing transactions connected to self-dealing, thereby protecting the organization from continued losses.
Reviewing the records of self-dealing and other relevant business documents with a skilled legal team can help frustrated partners explore their options. A successful partnership lawsuit can lead to financial compensation and the end of a partnership with a person who has breached their fiduciary duty.
