• Recent Posts

  • Martindale Hubbell AV Rating

    The Greater Williamsburg area is an exciting place to live and work, especially because of the large number of entrepreneurs who have built businesses from the ground up. These entrepreneurs have taken their passion and made it their profession. Many of us want to take that step. Before you begin, you need to think of the type of business entity you want to form. Our attorneys have extensive business experience, from small one-person companies to publicly traded major corporations. Our attorneys are among the leaders in Virginia in the representation of Common Interest Communities. These communities are generally referred to as "homeowners associations," or "HOAs," and "condominium associations." In the greater Williamsburg area alone, we provide legal assistance to nearly 100 associations. Our attorneys have successfully prosecuted and defended a wide array of civil disputes involving community association covenant enforcement, commercial transactions, construction disputes, contracts, real estate matters, boundary line and easement disputes, employment matters, antitrust litigation, copyright violations, administrative proceedings, and estate issues. Real Estate law encompasses a wide variety of matters, and our attorneys have vast experience to assist you. Whether you need assistance with a commercial or residential closing, or you have questions relating to residential or commercial leasing, we provide experienced advice and counsel to our clients. Zoning law can be a complicated maze of statutes and ordinances. We have ample experience in successful applications for rezoning, variance, and special use permit requests. Finally, commercial and residential construction provide special challenges with respect to financing issues and the construction process. We serve as counsel to various financial institutions.
Print This Post

What happens when your business partner wants to leave? Do’s and Don’ts

It’s a simple fact of business life that you and your company’s fellow shareholders or members will not always see eye-to-eye. Furthermore, our personal lives change and that effects the level of willingness in which some participate in a business venture.

As in any relationship, businesses also reach that awkward stage in which a shareholder or member wants to leave his current business venture and start something new. We have discussed starting your business and provided guidelines for setting forth the rules for governing your business.¬†This article addresses some of the difficulties that arise during the “break-up period.” For the purposes of this article, we will use the terms “shareholder” and “member”¬†interchangeably, as well as the terms “director” and “managing member.”

We advise regularly that you should begin your new business with fully developed and executed operating agreements or shareholder agreements. Those agreements provide the rules for operating your company and should include “buy-sell” provisions to set forth the conditions permitting shareholders to sell their interest in the company.

In small companies, the shareholders are typically employees of the company, as well as directors of the company. In each of these roles, the shareholder/employee/director has a continuing responsibility to the company even though all parties know that shareholder/employee/director intends to leave the company and sell their interest in the company in the near future.

Employees of the company have a duty of loyalty so long as they are employed by the company. If one of the shareholder/employees intends to resign from employment with the company, until that employee is separated from the company, that employee cannot compete against her employer. Therefore, although an employee can make arrangements for new employment, that right is not absolute. Soliciting customers, or taking client lists prior to separation has been called a breach of the duty of loyalty by the Virginia Supreme Court.

Furthermore, if the shareholder/employee is also a director of the company, that director has a fiduciary duty to discharge his duties in accordance with his “good faith business judgment of the best interests of the . . . company.” Actions taken that benefit the personal interests of the director at the expense of the best interests of the company violate the director’s fiduciary duty to his company. Therefore, a director invites contentious litigation if he begins setting up his new business venture by soliciting customers and employees of his existing company, while still acting as director of his existing company.

Litigation involving these issues can get very complicated and very expensive. If one of your small business’ shareholders intends to sell their interest and leave the company, immediately contact your experienced business attorney to develop an exit plan that is consistent with your company’s operating agreement and consistent with Virginia law in order to avoid litigation and to ensure your company’s survival.

Tarley Robinson, PLC, Attorneys and Counsellors at Law

Williamsburg, Virginia

John Tarley

John Tarley

John Tarley

John Tarley

John is the firm's managing partner and chairs the firm's small business, zoning, and litigation practice areas.

More Posts - Website

Follow Me:

Filed under: Business Planning, General Interest, John Tarley, Merger & Acquisition, State & Federal Litigation by John Tarley

Comments are closed.

« | »
  • Phone Numbers

    (757) 229-4281- Office

    (757) 229-7439 - Fax
  • Address

    4801 Courthouse Street Suite 122 Williamsburg, Virginia 23188
Web Development by OneWaveMedia.Com