A dispute between partners is more common than entrepreneurs initially expect. A general partnership is based on cooperation, trust, and shared responsibility. When that trust disappears and conflicts persist, the business can end up at an impasse. Many entrepreneurs then ask themselves: what can I do if the collaboration with my partner no longer works?
In this article you will read where conflicts between partners arise, which practical solutions are possible, and when legal steps become necessary.
When does a dispute between partners arise?
A dispute between partners rarely arises overnight. Usually there is a buildup of problems, such as:
- agreements that are consistently not honored;
- unequal effort or involvement;
- difference of opinion about the company’s direction;
- financial uncertainty or mistrust;
- personal tensions that spill over into business.
As long as conflicts are not discussed or resolved, the likelihood of escalation increases.
Why conflicts within a VOF are particularly sensitive
In a VOF, partners are personally liable for the debts of the business. As a result, a conflict between partners affects not only the collaboration, but also the personal assets of the entrepreneurs involved.
That is precisely why it is important to address a conflict promptly and carefully.
What do the agreements and the collaboration agreement say?
In the event of a dispute between partners the first step is always to consult the partnership agreement (collaboration agreement).
It often contains provisions on:
- division of responsibilities and authorities;
- decision-making;
- distribution of profits and costs;
- exit or termination;
- dispute resolution.
Are clear agreements missing? Then there is often room for discussion and legal proceedings.
Practical solutions for a dispute between partners
1. Start the conversation
At an early stage, an open conversation can prevent a lot of damage. This requires both parties to be willing to put business interests first.
2. Review and formalize agreements
If the collaboration can still be saved, revising and re-establishing the agreements can help reduce conflicts.
3. Separate tasks and responsibilities
In some cases, a different division of tasks or a clearer authority structure can reduce tensions.
4. Exit of one partner
If collaboration is no longer feasible, it may be the exit of one partner be a solution. This must be handled with legal care to limit liability risks.
5. Termination of the VOF
When the conflict has become unsolvable, the termination of the VOF be the only realistic option. This means that the business is wound up and the assets are distributed.
6. Legal steps
If consultation does not provide a solution, legal steps may be necessary to enforce rights or break an impasse.
What if your partner does not honor agreements?
When a partner consistently fails to adhere to agreements, this may constitute breach of contract. This can be grounds for withdrawal, termination of the collaboration, or a claim for damages.
It is important to document this properly and not wait too long.
Consequences of an escalating conflict
A prolonged conflict between partners can have major consequences:
- deadlock in decision-making;
- loss of customers and revenue;
- increase in debt;
- personal liability risks;
- lengthy legal proceedings.
International aspects
In international collaborations or with foreign partners, a dispute can become especially complex. Questions about applicable law and the competent court then come into play.
You can find general information about collaborating as an entrepreneur at the Chamber of Commerce.
Common mistakes in disputes between partners
- waiting too long to intervene;
- failing to record clear agreements;
- letting emotions prevail;
- underestimating personal liability;
- litigating without a strategy.
What can Arslan Advocaten do for you?
Arslan Advocaten assists entrepreneurs with a dispute between partners. We analyze your position, advise on possible solutions, and assist with negotiations or legal proceedings.
Read more about our expertise in business law, about the termination of a general partnership and for withdrawal from a general partnership.
Costs and litigation funding in VOF disputes
In disputes concerning a conflict between partners we generally do not work on a no cure no pay basis. Such cases require a careful legal and strategic approach.
However, that does not mean you have to bear these costs yourself. In many VOF disputes is litigation funding possible.
We work with an independent litigation funder who – after a substantive assessment – may decide to pay all litigation costs, including:
- attorney’s fees;
- court fees;
- expert fees;
- costs on appeal.
If litigation funding is granted, you as the client end up paying nothing. The litigation funder bears the full financial risk.
The litigation funder only receives a fee upon success. For you, this means that litigation is possible without financial risk.
About the author
This article was written by Onur Arslan, attorney and founder of Arslan Advocaten. He specializes in business disputes, including conflicts within VOF structures.
Would you like to discuss how your conflict with your business partner can be resolved?
