They say two heads are better than one—but when business partners fall out, it can feel more like a legal tug-of-war than a team effort.
Partnership disputes are among the most emotionally and commercially charged conflicts in business. Why? Because they blend legal complexity with personal relationships, broken trust, and the bitter taste of shared profits gone sour.
The Nature of Partnerships
In English law, a partnership is formed when two or more people carry on a business in common with a view to profit (in accordance with the Partnership Act 1890). No written agreement is strictly required—meaning many partnerships are formed informally, on a handshake, with little thought for what happens if things go wrong.
And that’s precisely where the trouble starts.
Common Causes of Dispute
Profit-sharing disagreements
Breach of duties (e.g., duty of good faith, fiduciary duty)
Misuse of partnership assets
Decision-making deadlock
Allegations of exclusion or misconduct
What begins as a disagreement over business direction or dividends can quickly spiral into accusations of betrayal, financial mismanagement, or even fraud.
The Legal Challenges in Resolving Disputes
Resolving partnership disputes is notoriously difficult under English law, particularly when:
1. There is no written agreement
In the absence of a partnership deed, the default rules in the Partnership Act 1890 apply—and they are old, vague, and often not as helpful as they should be. For example, all partners are entitled to equal shares of profits, regardless of their contribution, unless agreed otherwise.
2. There is no clear exit route
Unlike limited companies, partnerships do not have a separate legal personality. If a partner leaves, dies, or wants out, the partnership may dissolve entirely. This can create legal and financial chaos.
3. Deadlock is difficult to break
Disputes between 50/50 partners with no overriding agreement often result in stalemates, with neither party able to force a resolution without animosity growing and often going to court.
4. Court proceedings are messy and expensive
Litigation in partnership disputes is often a last resort—but when it happens, it’s slow, costly, and emotionally draining. Disclosure of documents, valuation of assets, and forensic accounting can all drag the dispute into murky waters.
5. Personal animosity gets in the way
Unlike corporate shareholders, partners are often more emotionally invested. Resentments build. Communication breaks down. Compromise becomes nearly impossible.
What Can Be Done?
Draft a robust partnership agreement
Prevention is the best cure. A well-drafted Partnership Deed can set out dispute resolution procedures, exit strategies, and profit-sharing mechanisms that avoid ambiguity.
Mediation
Before heading to court, consider mediation. It can help partners step back from the brink and find a commercial way forward without litigation.
Seek legal advice early
The earlier you involve a solicitor, the more options you’ll have to protect your position and steer negotiations constructively.
Conclusion
Partnerships can be powerful, but when they unravel, the consequences are deeply personal and legally complex. English law provides a framework—but often a flimsy one without proper agreements in place.
Asit Jansari – Solicitor can help clients navigate the storm—whether through renegotiation, mediation, or, where necessary, litigation. If your partnership is showing signs of strain, don’t wait until the break-up hits court.
Let’s talk. Contact me to talk through the options
T: 07966 244498
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