Private company owners and investors need counsel with a keen understanding of their business goals, as well as the daunting challenges they face in owning, investing and operating their company. Bradley’s Business Divorce team has extensive experience representing private owners and investors who have invested substantial time, effort and financial capital in their successful private companies. We assist our clients in handling many different types of conflicts that arise in their businesses, and we understand our clients’ legal and business concerns as we guide them through the process of a business divorce.
Business divorce disputes take place between business majority owners and minority investors who may be cofounders of a company, family members, or longtime friends. As with a personal divorce, conflicts between those who hold substantial ownership stakes in private companies can be complex, personal, and highly contentious. Adding to the complexity, there are different types of business entities, and the laws regarding their governance and operation can differ greatly. Experienced legal counsel who have a track record of providing clients with sound advice and strategic guidance can be invaluable in these circumstances.
A business divorce can result from a long-held disagreement between business partners or it can be triggered by other factors, including a change in leadership, a major change in the company’s financial performance, or an external problem that threatens the company’s continued success. In many cases, the potential exists for a conflict to escalate between business partners to such an extent that it becomes difficult for them to agree on a pragmatic resolution. When emotions between partners run high, our business divorce attorneys stay focused on getting results and executing a plan designed to achieve the client’s specific business objectives. Favorable outcomes are pursued through negotiations in the boardroom or, when necessary, by actively prosecuting claims for our clients in litigation or arbitration proceedings.
Our business divorce attorneys are dedicated to and proactive in protecting our clients’ business interests. From the first meeting with a client, we develop, pursue and implement strategies geared to preserving financial assets while mitigating the stress that is inherent when business divorce conflicts arise.
Private company investing provides the opportunity for a strong financial upside, but minority investors who acquire stakes in emerging or high-growth businesses appreciate that this type of investing is often accompanied by high risk. Bradley’s Business Divorce team represents minority investors who hold substantial investments in a variety of private companies (LLCs, S corporations and limited partnerships) across a range of industries, including technology, real estate, manufacturing, energy, banking, healthcare, pharmaceutical, insurance, construction, restaurants and e-commerce.
For our minority investor clients, we actively protect and enforce their rights when they are in conflict with a company’s majority owners. In some cases, our investor clients have been confronted by freeze out/squeeze out tactics — they have been forced out of the business, have been denied their proportionate share of company profits, or they have been improperly barred from actively participating in the company’s management or operation. In most cases, the majority owners have engaged in breaches of their fiduciary duties to the company to the detriment of investors. In every situation, we work closely with our minority investor clients to identify their business goals, and develop and pursue a detailed, customized plan designed to achieve those objectives.
Bradley’s business divorce lawyers advise clients in every aspect of the process, from the time that investors first consider investing in a privately held company to the time that they exit the business. We negotiate the purchase terms under which they acquire their interest in the company and take steps to assure the investor secures a binding contract exit plan. When information is improperly withheld from an investor following the investment, we assist our clients in obtaining access to the company’s books and records so they can evaluate its performance and the value of their minority stake.
We view litigation as an important tool, but our approach is pragmatic; we take legal action on behalf of minority investors only when the majority owner fails to or is unwilling to negotiate a reasonable business solution. If litigation does become necessary, our team has a successful track record for our clients in state and federal courts, as well as in arbitration proceedings.
Services for Minority Investors
Bradley provides a full array of services for minority investor clients, including:
When the time comes for an exit from a business, we help investors secure a buyout on favorable terms and protect our clients’ rights as minority owners. If litigation becomes necessary, we work closely with well-qualified expert witnesses, including forensic auditors and business valuation professionals, to determine the scope of wrongdoing and assess the value of the minority-held ownership interest in the business. At all times our focus is on securing a result that meets the clients’ business objectives in the most efficient, cost-effective manner.
Among the many challenges that majority owner clients may face in the operation of their business are conflicts with their co-owners. During the startup phase or as the company has grown, the majority owner may have accepted investments from others, including from family members, friends, private equity firms or employees. Some of these investors may acquire an ownership stake in the business by contributing “sweat equity” without ever having made any capital investment in the company.
Disputes often arise when one or more minority investors want to exit the business. If a “buy-sell” agreement exists, the investor will have a contractual “exit right” that requires the company or the majority owner to purchase the minority interest. Navigating the buyout process requires skillful counsel to assist the owner in keeping things on track and preventing the minority owner from re-trading the deal that was struck at the outset. When no buy-sell agreement exists, the minority owner may take a variety of disruptive steps to agitate for a buyout (i.e., a minority investor without any contract exit right will attempt to become a “squeaky wheel” in an effort to secure a voluntary buyout). In these situations, Bradley’s Business Divorce team works closely with majority owners to assist them in maintaining their control over the business and navigating a cost-effective exit for the investor that maintains the continued success of the business.
Resolving Business Conflicts with Minority Investors
We have a team of seasoned trial attorneys, but whenever possible, we strive to resolve conflicts with minority investors without litigation. In some cases, disputes between owners may be the result of a misunderstanding or a lack of transparency in the operation of the business. In these instances, we take a practical approach to address the reasonable concerns of minority investors by finding common ground.
Specifically, we assist majority owners by:
Our pragmatic and results-oriented approach seeks to promptly resolve disputes with minority investors to avoid lawsuits, save money, avoid the distraction of litigation, and allow the majority owner to keep the company on track with its business goals.
Negotiating/Documenting Minority Owner Buyouts
There are some conflicts with minority investors, however, that can only be resolved through a buyout of the investor’s ownership stake in the business. In those situations, we have experience negotiating, structuring and documenting the terms of the purchase of the minority investor’s interest in the company. During the buyout process we assist with:
Representing Majority Owners in Litigation
When a conflict resolution with a minority investor cannot be reached on favorable terms, our team aggressively handles litigation for the majority owner in state and federal courts, as well as in arbitration proceedings. We defend our majority owner clients against claims by minority investors alleging that the owners breached their fiduciary duties to the company, as well as claims alleging that majority owners failed to comply with applicable corporate governance documents.