Abandonment is one of the reasons behind many complex litigations involving business partners. When a business partner leaves a partnership without proper dissolution, they may be considered to have abandoned it. For example, if they leave the business before the termination date, without following the required procedures for dissolving the partnership.
Here is what to know about partnership abandonment:
Is it a breach of contract?
Abandonment in a business partnership can be a breach of contract because it typically violates the agreement. The partner abandons their responsibilities and fails to fulfill their obligations as stated by the contract.
Additionally, it can be a breach of fiduciary duty if the departing partner acts against the best interests of the business for their own gain. For instance, when they fail to take business opportunities for the partnership, but instead take them for their own personal gain. Or when their negligence in how they handle their duties leads to financial harm to the business.
Self-dealing is also not uncommon when a partner is abandoning a business. A departing partner may engage in transactions for their own profit without the other partner’s knowledge, leaving the business in a vulnerable state. For example, when they misappropriate funds, use the company’s customer list or trade secrets for personal gain or take company assets.
What can you do?
Not all business partnerships get to the termination date. A partnership that starts as a perfect fit might not work due to mismatched priorities, differing values and personal issues. So, your business partner can leave anytime they want. However, they need to follow the agreement they signed.
If your partner has abandoned the business, you may have grounds to hold them accountable. Get more information about their departure to know if they breached their fiduciary duty or the partnership agreement.