There’s a reason that attorneys are called counselors — they counsel clients on the best course of action in legal matters. As a general rule, attorneys are not supposed to represent parties that may have opposing interests. When a group of shareholders are involved in a business dispute, the interests of shareholders with a large stake in the company may differ from those with smaller stakes. In that case, one attorney cannot provide effective counsel to a group with adverse interests.
Having your own attorney in a business divorce provides you with the benefit of having your individual interests as an owner and investor protected. Once your attorney has reviewed the governance documents and related ownership agreements, he or she can counsel you on your objectives prior to beginning negotiations. Some considerations include:
- Whether you want to retain any continuing interest in the company
- If the company is being sold, is it possible to secure a “true up” provision so you obtain the maximum benefit for your ownership interest
- Are there any other rights — patents or other intellectual property — that the majority owner(s) would want to purchase
- How the payment for purchasing your interest will be taxed — as a capital gain or ordinary income
- Will you need to provide a non-compete agreement and if so, what is the scope and term
If it appears that dissolution of the business, whether voluntarily or involuntary, is the only realistic option, then getting a true valuation of the business and its existing assets is critical. Your attorney can work with a business valuation expert to help you get a firm grasp on the actual value of the business should a buy-out of shares or interest or a sale of the entire business be the ultimate resolution.
In addition, your attorney will ensure you don’t run afoul of compliance laws dealing with the preservation of evidence that may be relevant to any litigation, including electronically stored information such as emails and text messages.
A business divorce that is not managed well can damage the business itself as well as the value of the owners’ interests. An experienced business divorce attorney can provide effective management of legal, business and personal issues to maximize your financial investment in the business.
Williams Mestaz, L.L.P., is a law firm with decades of experience in commercial litigation, including employee lawsuits, IP infringement, business divorce, aviation, and high stakes litigation. Contact us at (602) 256-9400 and schedule a time to meet with us today.