How To Stop A Business Partner From Committing Fraud
It’s not unusual for partners in business to fall out of favor with one another.
The hope is that the dispute can be resolved, the business salvaged, or some sort of equitable buyout can be reached.
Sometimes this outcome is achieved with little headache, and the business is freed from the constraints of domestic disturbance.
But all too often situations arise where tempers flare, access to business accounting documents and financial records are denied, or, worse, money is diverted away from the business by a self-interested partner trying to take what they believe belongs to them.
Sometimes one partner will even attempt to unilaterally terminate the business or make performance of job responsibilities so difficult in order to effectuate an early-business closure.
In these types of volatile situations, there are tools at your disposal which you can implement in order to stop this detrimental conduct and maintain the status quo while you either litigate your claims or attempt to figure out a “peaceful” resolution.
Orders to Show Cause are emergency applications you can file with the Court that provides some sort of injunctive, interim relief.
This relief is often granted through the lens of a Temporary Restraining Order (“TRO”) and, later, a Preliminary Injunction.
A Temporary Restraining Order is court-ordered relief that enjoins a bad actor from continuing to engage in some sort of illicit conduct – be that diverting assets away from the business or engaging in conduct which can otherwise harm you as a rightful owner of the business.
While a TRO may be granted right away, it may not last very long because the other side typically has not yet had an opportunity to put in formal opposition papers to the Court.
After granting a TRO a judge instructs the parties to come back to Court so that s/he can listen to oral argument after reviewing the legal submissions made by both sides.
If the Court decides that the conduct complained of is serious enough to warrant an extension of the relief previously provided, it will grant what’s called a Preliminary Injunction.
A Preliminary Injunction is a form of interim injunctive relief that extends (and sometimes modifies) the relief afforded in the TRO for an extended period of time – usually the duration of the entire litigation.
That way the “status quo” of the business is maintained until the underlying dispute between the Parties is resolved.
The bottom line is this: while disputes can be worked out amicably, all too often an unsuspecting business partner waits too long to file suit, or does so without seeking injunctive relief.
The problem in these situations is that by the time the dust settles, the business’ trade secrets may have already been stolen; the business’ assets may have been sold; or its bank account may have been depleted.
Injunctive relief is the remedy that affords a party protection from these bad acts.
If you are a business owner currently ensconced in a partnership dispute, or has concerns that a dispute is forthcoming, one of our attorneys can speak with you about your unique matter.
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