Partnership and Shareholder Dispute Lawyer
A business dispute rarely starts with a lawsuit. More often, it begins with a decision made without notice, a distribution that never arrives or a password that suddenly stops working.
One owner may discover that contracts are being signed without approval. Another may learn that company money has been transferred to an affiliated business. A shareholder who once participated in every important decision may no longer receive meeting invitations or financial reports.
At that point, the disagreement is no longer about one payment or one missed conversation. It may be about who owns the business, who has the authority to run it and whether the relationship can continue at all.
Arkady Bukh Law Firm represents partners, shareholders, members, founders, investors and closely held businesses in disputes involving ownership, control, financial records, profit distributions, fiduciary duties, buyouts and dissolution.
A partnership dispute attorney may become involved while the company is still operating, after one side has been excluded from management or when urgent court action may be needed to prevent a transfer of assets or a sudden change in control.
The firm’s broader work in commercial disputes is described on the Litigation page.
What Was the Original Deal?
Many disputes begin with a gap between the documents and the way the owners actually ran the company.
An operating agreement may give one person formal authority, although the owners acted as equals for years. Shares may have been promised but never formally issued. An investor may have transferred money believing that it purchased an ownership interest, while the company later describes the payment as a loan.
Sometimes a founder is missing from the official ownership records even though the business was built around that person’s work, contacts and industry experience.
Before deciding what claim to bring, counsel needs to reconstruct the ownership history.
That review may include formation documents, stock certificates, subscription agreements, operating agreements, capitalization tables, tax returns, bank records, board minutes and messages exchanged when the business was formed.
The parties’ conduct can be just as important.
Who contributed capital? Who received distributions? Who signed contracts? How did the owners describe their relationship to lenders, employees, customers and accountants?
A title on a document matters, but it may not answer every question. The full record can show that the parties modified their arrangement, followed an informal agreement or created conflicting evidence about ownership and authority.
Ownership and Control Are Not Always the Same
A person can own a substantial part of a company without having practical control over it.
A minority shareholder may have equity but no authority to approve payments. Two equal partners may each have enough voting power to block the other. A divided board may be unable to appoint management or approve a major contract.
Control can also exist outside the formal documents. One person may have exclusive access to the company’s bank accounts, payroll system, customer database, email accounts and passwords.
The dispute becomes urgent when ordinary operations begin to stop.
Employees still need to be paid. Vendors expect invoices to be approved. Customers need someone authorized to make decisions. Rent, insurance and taxes do not pause because the owners are fighting.
A sensible legal strategy should account for the business during the case, not only the final judgment. In many matters, the first priority is keeping the company from losing its value while the parties decide who will control it or whether one side will leave.
Where Did the Profits Go?
An owner may believe that distributions are being withheld. The other side may argue that the company needs working capital, has outstanding debt or is investing in expansion.
Neither explanation can be evaluated without the financial records.
The disagreement may not involve formal distributions at all. Value can be taken from a company through salary, consulting fees, management charges, personal expenses, loans, related-party payments or contracts awarded to another business controlled by the same owner.
A shareholder dispute lawyer may need to compare reported revenue with bank deposits, tax returns, payroll, owner compensation and payments to affiliated companies.
The question is not simply whether money left the account. It is why the payment was made, who approved it and whether the company received fair value in return.
Some disputes can be understood from the ledger. Others require assistance from a forensic accountant or valuation professional, especially when transactions that looked ordinary in isolation reveal a different pattern when reviewed together.
When One Owner Has All the Records
A shareholder cannot make an informed decision about the business without reliable information.
The missing materials may include bank statements, tax returns, general ledgers, customer contracts, payroll records, shareholder lists, board minutes or correspondence with the company’s accountant.
Sometimes access is removed completely. In other situations, the company produces a limited set of records that does not answer the important financial questions.
Inspection rights depend on the type of entity, the state of formation, the governing documents and the reason for the request.
New York Business Corporation Law Section 624 requires corporations to maintain certain books and records. It also provides qualifying shareholders with inspection rights for purposes reasonably related to their interests as shareholders.
Delaware law likewise allows a stockholder to demand specified corporate records for a proper purpose, provided the request satisfies the statutory requirements concerning its form, scope and connection to that purpose.
A demand for records should therefore be prepared carefully. Asking for every document the company has ever created may invite objections. A focused demand can identify the records needed to investigate a particular transaction, ownership issue or use of company funds.
Timing matters too. A pre-litigation inspection demand may serve a different purpose from discovery after a complaint has already been filed.
Fiduciary Duty Is More Than a General Claim of Unfairness
The phrase “breach of fiduciary duty” appears frequently in owner disputes. It should not be used as a substitute for identifying what actually happened.
Not every bad decision is a breach. Businesses take risks. Forecasts fail. Owners disagree about hiring, pricing, investment and growth.
A fiduciary duty claim usually turns on more specific conduct.
For example, a controlling owner may direct company business to another entity they own. Management may approve excessive compensation without disclosure. New shares may be issued to weaken another owner’s voting power. A corporate opportunity may be taken personally instead of being offered to the company.
In another case, the allegation may be that management withheld material information from the board, approved a transaction without understanding it or allowed company assets to be used for a private purpose.
The defense may show that the transaction was disclosed, authorized, independently approved or fair to the company. The evidence may also show a disagreement over business judgment rather than disloyal conduct.
These claims are usually decided through the details of particular transactions, not broad statements that one side behaved unfairly.
Minority Owners Can Be Excluded Without Losing Their Shares
A minority shareholder may still appear in the official records while losing almost every practical benefit of ownership.
The person may be removed from employment, excluded from meetings and denied access to financial information. Distributions may stop while the controlling owners continue paying themselves. Customers or business opportunities may be transferred to a new company. Additional shares may be issued in a way that reduces the minority owner’s percentage.
The available remedies depend on the entity and the law governing it.
In New York, holders of at least 20 percent of the voting shares of certain closely held corporations may seek judicial dissolution based on illegal, fraudulent or oppressive conduct by those in control, or on allegations that corporate property is being looted, wasted or diverted. The court must also consider whether liquidation is the only feasible way to obtain a fair return and whether dissolution is reasonably necessary to protect shareholder interests.
Dissolution is not always the best result.
A buyout, targeted injunction, independent accounting or adjustment to the company’s governance may preserve more value than closing the business.
The client’s goal should guide the case. One shareholder may want access to records and a return to management. Another may want a fair price for the shares and a clean exit.
A Buyout Is Not Just a Percentage of Revenue
Buyout negotiations often break down because the owners are not valuing the same thing.
One side may focus on historical earnings. The other may emphasize future contracts, intellectual property, customer relationships or the company’s growth prospects.
Before selecting a valuation method, several questions need to be answered.
Is the entire company being valued, or only one ownership interest? What valuation date applies? Should unusual owner compensation be adjusted? Were personal expenses paid through the business? Was revenue redirected to an affiliate? Does the company depend on one founder or one major customer?
A valuation expert can provide analysis, but the result is only as reliable as the information supplied.
An expert working from incomplete books may produce a precise number that rests on inaccurate assumptions. Before the parties debate discounts, multiples or future earnings, they need confidence that the financial information reflects the business as it actually operated.
Deadlock Can Leave a Healthy Company Unable to Act
Disagreement is normal. Deadlock is different.
A deadlock occurs when the company’s governing structure cannot produce a decision and the business begins to suffer.
This is especially common in a 50-50 company with no tie-breaking mechanism. One owner may refuse to approve spending. The other may block hiring. Neither side can replace management, authorize a loan or enter an important contract.
The company remains legally active but practically unable to function.
The operating or shareholder agreement may offer a solution through mediation, arbitration, a third director, a buy-sell provision or a forced-sale procedure.
Those provisions do not always solve the problem immediately. The parties may dispute whether the deadlock provision was triggered, whether the notice was valid or whether one side followed the required process.
Where the documents provide no workable answer, the case may involve dissolution, enforcement of voting rights, appointment of a neutral person or another remedy available under the governing law.
The most aggressive remedy is not always the most valuable one. A prolonged court fight can consume working capital and damage customer relationships, leaving both owners with less than they could have received through a structured separation.
When the Situation Cannot Wait
Some disputes require action before the court has time to decide the entire case.
One owner may be moving money, issuing new shares, transferring customer contracts, changing account access or preparing to sell an important company asset.
Once the transaction occurs, a later award of damages may not fully repair the damage.
A request for a temporary restraining order or preliminary injunction must be based on evidence. In federal court, Rule 65 governs this type of relief. A temporary restraining order issued without notice requires specific facts showing that immediate and irreparable injury will occur before the other side can be heard, together with a written explanation of the efforts made to provide notice and why notice should not be required.
The practical work often begins before the motion is written.
Counsel may need bank records, emails, board documents, contracts and sworn statements on short notice. The requested order should address the threatened conduct without making it impossible for the business to continue operating.
Emergency relief is intended to preserve the situation until the dispute can be heard. It does not decide every ownership or liability issue.
Filing First Is Not Always the Best First Move
A lawsuit may ultimately be necessary, but immediate filing is not always the most useful opening step.
Counsel may begin with a focused demand for records, a request to reverse a disputed transaction or a proposal for temporary rules while the owners negotiate.
The parties might agree that no unusual payments, ownership changes or asset transfers will occur for a limited period. That breathing room can allow discussions about a buyout or management transition without employees and customers becoming involved in the conflict.
There are also situations where waiting is dangerous. Evidence may disappear. Assets may be transferred. A contractual or statutory deadline may expire. One side may already be preparing formal action.
The choice between negotiation and immediate litigation should come from the facts. It should not be driven by a general belief that every case must settle or that filing first always creates an advantage.
Ordinary Business Records Often Decide the Case
Owner disputes produce strong emotions and conflicting accounts. Courts still need documents and testimony.
Useful records may include:
- operating and shareholder agreements;
- meeting notices and board minutes;
- capitalization tables and stock records;
- bank statements and accounting files;
- tax returns;
- employment and compensation agreements;
- contracts with customers and affiliated businesses;
- emails and messages between the owners.
The absence of formal records can also be significant, although it does not automatically prove wrongdoing. Closely held businesses are often managed informally.
The purpose of the review is to understand how the company actually worked.
Who made the decisions? Who had access to the accounts? How were profits distributed in previous years? Were related-party payments disclosed? Did an owner object when the transaction occurred, or only after the personal relationship deteriorated?
A clear timeline is usually more persuasive than a long collection of general accusations.
Questions Partners and Shareholders Commonly Ask
Can my business partner remove me from the company?
It depends on the entity, the governing documents, the person’s ownership rights, the employment relationship and applicable state law. Removal from employment or management does not necessarily eliminate an ownership interest.
Can a shareholder demand financial records?
Shareholders may have rights under statutes, governing documents or both. The scope and procedure vary. A demand should explain the purpose of the inspection and identify records connected to that purpose.
What can I do if another owner is using company money personally?
Preserve the available records and obtain legal advice promptly. Depending on the facts, potential remedies may involve an accounting, fiduciary duty claims, damages, an injunction or dissolution.
Can a court require one shareholder to buy out another?
A buyout may be available under the governing agreement or a particular statutory procedure. The answer depends on the jurisdiction, type of entity and claims involved.
Does a 50-50 dispute automatically result in dissolution?
No. The governing agreement may contain a deadlock procedure, and other remedies may be available. Dissolution is one possible outcome, not an automatic one.
Should I stop speaking with the other owners?
Routine business communication may need to continue. Avoid threats, destruction of records or sudden unilateral action without legal advice. Written communications may later become evidence.
The Result Should Make Business Sense
Winning a legal argument does not always solve the client’s real problem.
A judgment may arrive after the company has lost customers, employees and working capital. A prolonged ownership battle can reduce the value that both sides are trying to protect.
The strategy should consider what the business will look like when the dispute ends. In some cases, the goal is continued operation under clearer rules. In others, it is a buyout, division of assets or orderly dissolution.
Arkady Bukh Law Firm represents partners and shareholders in disputes involving ownership, management authority, profit distributions, access to records, fiduciary duties, minority rights, buyouts, deadlock, dissolution and emergency relief.