Can your business partner sell without your consent?
Business partnerships are common in many industries. Partners share the burden of work and divide the day-to-day duties. For example, one partner may handle the financial side while the other focuses on attracting customers to the business.
However, partnerships can go wrong, even after many successful years of trading. As a result, a partner may try to sell a share or even all of the business without seeking your consent.
When you go into business with someone else, it's possible that you simply start work and let the business evolve. This may happen if you've known your business partner for a while as a relative or a friend. You may feel you have, or can develop, a good working relationship based on trust and without the need for a formal partnership agreement. On the other hand, you may want to be completely clear about roles, responsibilities and financial matters from the beginning. In these circumstances, you could ask a solicitor to draw up a written partnership agreement. You are not under a legal obligation to have such an agreement but without it, your partner may be able to sell part or all of the business without your consent.
Selling without your consent and without a partnership agreement
Legally, your partner can sell part or all of a business without your consent if you do not have a written partnership agreement. Not only does your partner not need your consent. Your partner could sell a share of the business without even mentioning the matter to you. It is also possible for your partner to sell all of the business in this way by suggesting to a prospective buyer that you have implied your consent to the sale.
Selling without your consent when a partnership agreement is in place
If you have a written partnership agreement in place, your partner should not be able to sell part or all of the business without your consent. However, the partnership agreement must contain a clause that obliges your partner to seek your consent first. The clause should also restrict any sale to the partner's share. If this clause is missing, you may struggle to prevent a sale when you don't agree with it.
Creating a partnership agreement
Creating a comprehensive written partnership agreement is vital to prevent the sale of part or all of a business without your consent. A verbal agreement is not enough because your partner may dispute it. Furthermore, you may wish to include a clause in the agreement that allows you to have the first refusal to buy your partner's share of the business. When setting up a partnership, you may therefore wish to seek the advice of a solicitor who specialises in business management.