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Partnership Disputes

A well drafted Partnership Agreement is absolutely necessary to avoid all possible disputes in future. Partnership dispute can occur for various reasons. When a Partnership Agreement lacks an apt dispute resolution clause, then the Partnership Act 1892 comes into play and resolves all issues relating to the dispute.


Our team of Sydney business lawyers at Owen Hodge can help your business resolve a partnership dispute.


When May a Dispute Arise?

Partnership disputes can arise due to various reasons including:

  • Underperformance of a Partner: Every partner is assigned with a specific role while forming a partnership. If a partner is unable to carry out his/her duties well, then a dissent may arise among the other partners.
  • Secret profits: All the profits incurred in the partnership must be clearly declared before all the partners. Any secret profit taken by any partner without the knowledge of other partners may raise a conflict in the partnership.
  • Conflicting interests: It is imperative that all partners within a partnership have common interests in businesses. If two partners have a different vision and the rest of the partners do not agree to the same, a conflict may arise.
  • Management/personality conflicts: In this situation the most sensible course of action may be to dissolve the partnership altogether. In some cases you may need to involve the Courts to ensure that all loose ends are tied up so that the company’s assets are divided fairly.

 

Process to Resolve Disputes

A decent and well-balanced dispute resolution process is essential for maintaining the smooth functioning of the partnership business. The process commences right from choosing what kind of resort the parties are looking for; or any technique explicitly mentioned in the Partnership Agreement. If the method resorted for resolving the dispute is mediation, then the appointment with the mediator or the place of mediation would be considered as a part of the dispute resolution process. There are various options available to all the parties for resolving partnership dispute. The parties can either negotiate by settling down at an agreement by the process of Alternative Dispute Resolution (ADR), or can go to the Court for settlement.

 

ADR

The most frequent option to resolve partnership disputes is ADR. There are many benefits to ADR, including:

  • Time and cost saving: Any technique used under ADR process can be more cost and time effective.
  • Flexibility of processes and outcomes: It allows the parties in dispute to adopt a flexible way while following ADR. The process can be adjusted according to the needs of the parties.
  • Control: Parties to a dispute may choose the most appropriate neutral person to negotiate their dispute. They also have the right to choose the time, place, and the date according to their convenience.
  • Confidentiality: Any of the technique mentioned under ADR and used by the parties to dispute, will always remain strictly confidential.

In the event of any disputes arising from a partnership, a person has three most efficacious options to resolve the disputes which are outlined below:

  • Arbitration: It involves an arbitrator either appointed by the parties or by a Court. The decisions made by the arbitrator are legally binding on the parties. It is considered to be cost effective, simpler and a faster way of resolving disputes than the Courts.
  • Mediation: It is the process where an independent mediator is appointed to resolve the dispute. The mediator does not decide the dispute, but attempts to make a fair discussion. It is a very cost effective way of resolving a dispute, while giving an option to the parties to provide inputs for resolution of matters. The mediator does not impose a decision. In mediation, the outcome is entirely within the control of the parties, and not on a third person such as a judge.
  • Negotiation: Negotiation is considered to be one of the easiest forms of dispute resolution process. It is often seen that the parties to the dispute negotiate a resolution that is agreed to both without the need for formal mediation.

Our team of Sydney business lawyers at Owen Hodge can help your business resolve a partnership dispute.