Business Partnership Gone Bad

Previous | Next
 rated by 0 users
Latest post Mon, Mar 13 2017 11:32 AM by ca19lawyer2. 4 replies.
  • Sun, Mar 12 2017 3:58 PM

    Business Partnership Gone Bad

    I have a company that does investments. My company invests in different sectors of businesses such as Real Estate, Technology, Medical, and so on. I was approached by a very close friend that knew someone who was looking for seed capital to get an idea that he had off and going. We meet with the inventor, liked the invention and invested a total of One Hundred & Fifty Thousand dollars which garnered my company a 5% percent equity share of his company. The capital injection was implemented over a 9 month period just to ensure that the project would produce a final product when all the capital had been invested. During that 9 month period, our working relationship was excellent. A patent pending was issued for the product but as soon as the final injection of the investment was made the inventor disappeared. He will not return emails, phone calls, text messages, or any other type of communication. I spoke with him 3 weeks ago for the first time since November 2015. The conversation was not informative he explained that he was working to build the brand and he was looking to bring other investors aboard to fund the company. I spoke with him about YTD sales and the health of the company and he claims that he didn't know how many sales had been made because his Attorney handled things like that. Long story short my company has an equity position in a business and is being ostracized from information that all partners should be privy to. What legal position do I have in this matter? I want out of this deal due to the fact that I feel that I'm doing business with an unethical, and unprofessional person.  

  • Sun, Mar 12 2017 4:33 PM In reply to

    • DOCAR
      Lawyer
    • Top 25 Contributor
    • Joined on Sat, Dec 9 2000
    • NV
    • Posts 5,444

    Re: Business Partnership Gone Bad

    It sounds like you are a minority owner in a start up business.  Is this an LLC or a corporation? What do the governing documents say about shareholder or member access to records.  What does your investment agreement say about access?   Unless you can find someone who can buy you out, you may be stuck.

  • Sun, Mar 12 2017 5:57 PM In reply to

    Re: Business Partnership Gone Bad

    The company is setup as an LLC. Below is a copy of what the agreement say about company access and member access to records.


    SECTION 7. BOOKS OF ACCOUNT, ACCOUNTING REPORTS, TAX RETURNS,
    FISCAL YEAR, BANKING 

    7.7 Books and Records. The Company, through an accountant of the Members' choosing shall maintain
    complete and accurate accounts in proper books of all transactions of or on behalf of the Company and shall
    enter or cause to be entered therein a full and accurate account of all transactions on behalf of the Company.
    Each Member shall have the right, on reasonable written request for purposes reasonably related to the
    interest of the Member to (a) inspect and copy during normal business hours any of the Company's records
    described in this Section 7 and (b) obtain from the Company promptly after their becoming available a copy of
    the Company's federal, state and local income tax or information returns for each fiscal year and taxable year
    hereunder.

  • Sun, Mar 12 2017 9:22 PM In reply to

    • DOCAR
      Lawyer
    • Top 25 Contributor
    • Joined on Sat, Dec 9 2000
    • NV
    • Posts 5,444

    Re: Business Partnership Gone Bad

    Then make your formal written demand to inspect the records per that section.  If the business has an office, give them reasonable notice and then go for the inspection.

  • Mon, Mar 13 2017 11:32 AM In reply to

    Re: Business Partnership Gone Bad

    DivineInvestments:
    Long story short my company has an equity position in a business and is being ostracized from information that all partners should be privy to. What legal position do I have in this matter?

    As far as I can tell, you, individually, have no legal position in this matter, except to the extent that you are an officer or partner (or whatever) of your company, which, as you noted, "has an equity position in" this other company.  You didn't explain what "equity position" means, so I don't know if your statement about your company "being ostracized from information all partners should be privy to" makes any sense.  Is your company, in fact a partner in this other business -- i.e., is the company in which your company invested actually a partnership?  If so, is it a general partnership or limited partnership?  What does the partnership agreement or other applicable documents say about your company's right to information.  Keep in mind that, in most cases, someone with only a 5% interest isn't going to be entitled to a ton of information.

     

    DivineInvestments:
    I want out of this deal due to the fact that I feel that I'm doing business with an unethical, and unprofessional person.

    Your company's right/ability to get "out of this deal" will depend on the terms of the relevant documents, so take those documents to a local attorney for review and advice.

Page 1 of 1 (5 items) | RSS

My Community

Community Membership New Users: Search Community