Top 10 effective partnership dispute management tips

There are a number of ways to get your partnership disputes resolved as quickly as possible. Here, we look at the top 10.

1. Communication

Communication is crucial and should be extensive and ongoing – this involves communication with the partner involved in the dispute, the other partners, the partnership leadership management and its professional advisers. You may wish to consider marking communications as ‘Confidential’ and ‘Legally Privileged’, and any offer letters as ‘Without Prejudice’.

2. Know your Partnership Agreement

A good Partnership Agreement will have provisions in place to govern disputes. Understanding these will be the first port of call in knowing how to navigate a dispute, and, likewise, understanding the procedure that the partners should take under the Partnership Agreement.

3. Know your figures

This does not apply to just your profit – get to grips with your capital accounts, current accounts, tax reserves, property accounts and actual and potential tax liabilities.

4. Keep clear records

It is impossible to tell how a partnership dispute will unfold and it is best practice to keep and preserve clear, comprehensive records of all steps you take – and steps taken by other parties – in case you ever need to refer to them.

5. Avoid being emotional and keep it factual

A dispute in a partnership can naturally be an emotional and frustrating time. However, the best way to navigate them is to keep a clear head and stay as objective as possible – try to avoid emotion getting in the way of the facts.

6. Get your team together

This includes your whole team – your legal team, accountant, tax adviser and property valuers if you have property. A face-to-face discussion with your entire team will be more productive than going back and forth between each party. Ensure that everyone is on the same page and understands the ultimate goal. Your team could well make the difference between an agreement being reached or a dispute escalating.

7. Work out your levers

Think about what the other side might want – what are they trying to achieve? With their likely goals in mind, consider what leverage you have to negotiate an agreement.

8. Prepare to negotiate

Negotiation is vital to try to avoid litigation or arbitration. It is the most cost-effective way to resolve any dispute and affords the parties the opportunity to reach a creative, commercial solution. Think about what you are prepared to compromise on – taking into account your leverage – and what you will set as boundaries. Consider whether there any issues you absolutely cannot compromise on and what they are.

9. Consider mediation

Mediation is a voluntary form of alternative dispute resolution in which a mediator will assist the parties to achieve an agreement between them. Mediation is actively encouraged by the courts. Should litigation get underway, attempts to mediate will be looked upon favourably.

10. Ultimately, if all else fails, prepare to litigate

This is usually the worst-case scenario due to the costs, time involved and the lasting damage to the relationship between the partners involved. However, it may be the only option where all other attempts at negotiation and mediation have failed. Even throughout litigation, keep one eye open to negotiate and mediate. There is a continuing obligation on parties to try to resolve their differences.

There are many factors to consider when navigating a dispute in a partnership and these will naturally depend on the specific provisions of the relevant Partnership Agreement. However, should you ever find yourself in that position, these tips will stand you in good stead as the dispute unfolds.