Resolving conflicts between partners.

Avocats, Conseils en réseaux

Life as a partner isn’t always a smooth ride, and sometimes relationships can get out of hand, sometimes to the detriment of the company.

So how can you avoid the pitfalls and put an end to a conflict with your partner?

First of all, it’s important to remember that the interests of the company must always come first in any relationship between partners.

A partner, whether a majority or minority shareholder, must not hinder the interests of the company.

The majority partner – or group of partners – must not make decisions for the sole purpose of benefiting him/her/them in a way that is detrimental to the company’s interests.

Similarly, a minority shareholder must not behave in such a way as to prevent the completion of transactions that would have been in the company’s best interests.

However, there are a number of tools you can use to prevent or limit conflicts between associates.

First of all, think carefully about the composition of your share capital. When setting up a company, it’s common to want a 50/50 partnership. However, behind an egalitarian distribution of this kind, it’s easy to see how the company could find itself in a deadlock in the event of a dispute between the partners.

It is therefore always preferable to have a majority partner or a third partner to balance out the distribution.

Next, take care when drafting your articles of association. This advice applies particularly to companies set up as simplified joint stock companies. You should pay particular attention to the articles relating to the exercise of your voting rights. Quorum requirements (the number of votes that must be present or represented at a meeting) and majority requirements (simple, reinforced or even unanimous majority) may be laid down.

You can also include a principle of amicable settlement in the clause relating to the settlement of disputes.

Finally, a shareholder agreement could prove useful. A true marriage contract, the pact has the advantage of being completely confidential. It enables the partners to specify, away from prying eyes, the rules of governance and to provide for partners’ exit options.

And if conflict remains unavoidable, a memorandum of understanding may be the best way forward.  This will enable you to put an end to your dispute quickly – at least more quickly than litigation – and discreetly. In particular, it will set out the terms and conditions for the departure of one of the partners, and the parties’ commitments in terms of post-contractual competition and confidentiality.

As you will have understood, even if disagreements between partners cannot be prevented, it is still possible to limit their effects, in the interests of the company in particular. To this end, we are at your disposal to prepare / review all your legal documentation.

Avocats, Conseils en réseaux

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