A buyout dispute may put years of work and a valuable company at risk. You might agree that one owner should leave, yet disagree over who has the right to trigger the buyout, what the ownership stake is worth or who controls the company during the process.
The answer often starts with the documents that govern your business. Those terms could set the conditions for a buyout and explain how you must determine the price. If the agreement does not resolve the conflict, California law may offer another route in some dissolution cases.
Review the terms of the buyout
Your shareholder, partnership or operating agreement may state when an owner has the right to demand a buyout. It might tie that right to a deadlock, withdrawal or breach of duty.
Consider reviewing those terms before assuming either side has the right to force a sale. The type of business you formed could also affect which buyout rights apply.
California law provides separate buyout rules for certain business entities in dissolution cases. For example, when a member of a limited liability company asks a court to dissolve the company, the other members may choose to buy that member’s interest at fair market value.
How is the buyout price determined?
Even when both sides agree to a buyout, you may still disagree over what the ownership stake is worth. The dispute might involve the valuation date, company debt or expected earnings.
Your agreement could set a valuation method or require an appraisal. California law also provides valuation procedures for some dissolution buyouts. If the parties cannot agree on value in qualifying LLC or corporate cases, the court appoints three disinterested appraisers. LLC interests use a fair market value standard, while corporate shares use fair value.
A wide difference between the two sides’ estimates might make settlement harder. Financial records could help explain how each side reached its valuation.
Organize your records before taking the next step
A buyout dispute may affect both your ownership stake and your role in the company. Reliable records could help you understand where the disagreement stands and what facts support your position.
Consider gathering your ownership agreements, financial statements and past appraisal reports. Keeping these records together might make it easier to review the disputed terms and prepare for negotiations or litigation.