Solving Disputes Among Business Partners and Owners

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Those with ownership stakes in privately held businesses, partnerships, or family offices need to closely collaborate with and trust others. When disagreements and disputes over rights and responsibilities arise, individual emotions and personalities can complicate matters. This ongoing series will help owners anticipate potential problems when structuring their businesses and find solutions to issues that commonly arise among owners of privately held businesses, both before and during litigation.

 

October 19, 2020

Four Considerations When Entering Into a 50/50 Business Relationship

By Hugo A. Gallegos and Nicholas M. Tipsord

Unlike businesses with a single controlling owner or several owners, a 50/50 business by its very nature is ripe for disagreement between its owners. Owners of a 50/50 business will need to proactively consider how to handle disagreements when setting up their business venture and drafting their operating agreement, shareholders agreement, or partnership agreement.

This first post explains common areas of disagreement between 50/50 owners. (Our next post will explore deadlocks between 50/50 owners and explain how to resolve them.)

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October 7, 2020

Attorney-Client Privilege in Ownership Disputes: Illinois Corporations and Other Jurisdictions

By Adam Diederich and Kirstie Brenson

We previously illustrated a scenario where the majority member and manager of an Illinois Limited Liability Company (LLC) investigates one of the LLC’s minority members for suspected wrongdoing. We explained that the minority member could likely obtain copies of emails between the LLC’s manager and attorney through a books and records request or through discovery in litigation – even if the company’s investigation of the minority member is the subject of those emails – unless the LLC’s operating agreement places limitations on the member’s right to access those documents.

But that is not the case in every jurisdiction. Rather, in most jurisdictions, a member of an LLC or a shareholder of a corporation generally cannot obtain access to the privileged communications of their LLC or corporation. Only in rare circumstances can a member or shareholder demonstrate, after a fact-intensive analysis, that they have good cause to access the LLC’s or corporation’s privileged communications.

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September 30, 2020

Attorney-Client Privilege in Illinois Ownership Disputes: Protecting Privileged Documents

By Adam Diederich and Kirstie Brenson

Consider this scenario: an Illinois limited liability company (LLC) has a majority member and three minority members. The majority member also happens to be the LLC’s manager, who we will refer to here as “Manager.” Manager suspects that one of the minority members (Minority Member) is embezzling company funds and begins to investigate Minority Member’s actions with the LLC’s attorney. Can Minority Member obtain copies of emails between Manager and the LLC’s attorney, either through a books and records request or through discovery in litigation? Unless the LLC’s operating agreement states otherwise, it is certainly possible. (See our prior post, which explains how members of an Illinois LLC can pierce the LLC’s attorney-client privilege to obtain communications between the LLC’s managers and its attorneys.)

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September 23, 2020

Attorney-Client Privilege in Illinois Ownership Disputes: Accessing Privileged Documents

By Adam Diederich and Kirstie Brenson

Business divorces are often messy. Those who individually or collectively control a private business sometimes seek to force out owners of non-controlling shares. The reasons vary – personality-driven disputes, disagreements over business direction, or timing and distribution of earnings. In other circumstances, controlling shareholders may want to push out a non-controlling owner because of alleged misconduct, including embezzlement, fraud, or self-dealing. When majority owners seek the legal advice of the company’s attorney to formulate and execute a plan to force out a minority owner, the company wants and expects this advice to be covered by the attorney-client privilege and therefore shielded from disclosure.

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