Litigation

Case Study

Buyout of Ownership Interests

Two friends founded related companies on handshake deals in the late ‘90s and early 2000’s. For twenty years, the companies flourished. However, because they never signed an operating agreement, bylaws, or other formation documents, the 50% ownership interest held by one of them transferred to his wife when he passed away. His wife had never been involved or interested in the companies’ operations, so our client offered to buy her out. Although our client obtained a valuation of her 50% interest, she refused to sell and insisted the companies were worth three times that amount. Negotiation turned into litigation, but we ultimately prevailed: for the original offer price, our client purchased her interests in all companies.

No matter how close friends are, they should always execute agreements governing their relationship to the company and to each other. Those agreements contemplate situations that owners don’t usually consider, like what happens to an ownership interest when one of the partners dies, how to remove a non-performing or bad acting member, what options are there when one member cannot afford an additional capital contribution, and other significant issues. Our attorneys carefully review and draft our clients’ operating and partnership agreements to: (1) preserve the current relationship, (2) protect future business and (3) create a roadmap for unforeseen circumstances.