What is a Business Divorce?
I’m Roger Cohen. I’m a shareholder at Jaburg Wilk. I’ve been practicing law for thirty-seven years. My primary areas of practice are commercial litigation, business transactions and business disputes of all shapes and sizes.
What is a business divorce?
Business divorce is the business equivalent of a real divorce. People have partnerships with their co-shareholders or the members of their limited liability companies and the issues that come up when they get into a conflict and can’t work together are very analogous to the issues that come up when married people can’t live together and need to be separated and divorced.
Is there an equivalent to a post nuptial agreement for businesses?
If the parties can agree, you can always enter into a consensual agreement that will spell out the rights and responsibilities going forward. The problem of course, is that it tends to be too late because by the time you get to the stage of realizing that you need to do something to make appropriate accommodation for things that are going badly, things are already going badly and you’re likely not to be able to reach an agreement.
How can I avoid a messy business divorce?
The best way to avoid it is to have a well drafted set of agreements. Be it a partnership agreement if you’re a partnership, an operating agreement for a limited liability company, or a buy/sell agreement between shareholders, because if you’ve spelled out the exit strategy before you go into the relationship, if things don’t work, then there are at worst a set of rules that you can look to decide how the company’s going to be split and how you’re going to go on with the rest of your lives.
About the author: Roger Cohen is a partner at Jaburg Wilk with over 30 years' experience as a business attorney, representing clients in both litigation and transactions. He has a deep knowledge and understanding of commercial law and the litigation process and is a forceful and effective advocate for his clients.