Partner Lockout in a Corporation: Legal Recourse and Solutions

Introduction: Business partnerships can sometimes experience conflicts and disagreements that escalate to the point where one partner takes drastic action, such as locking the other partner out of a corporation. If you find yourself in such a situation, it is crucial to understand your legal rights and seek professional guidance. This blog post will explore the actions you can take if your partner locks you out of your corporation. For expert legal assistance, contact Falcon Law PC at 1-877-892-7778 or via email at info@falconlawyers.ca.

Understanding Partner Lockout: A partner lockout occurs when one partner restricts the access and involvement of another partner in the affairs of a corporation. This action can include denying access to company premises, financial records, decision-making processes, and other essential aspects of the business. Partner lockouts can have severe consequences, including financial losses, damage to reputation, and potential legal violations.

  1. Review Corporate Governance Documents: The first step is to review the corporation’s governance documents, such as the articles of incorporation, bylaws, and shareholders’ agreement. These documents outline the rights and responsibilities of the partners and often provide procedures for dispute resolution. They may also contain provisions to prevent partner lockouts or specify remedies in such situations.
  2. Fiduciary Duties and Shareholder Rights: Partners in a corporation owe each other fiduciary duties, which include acting in good faith, exercising reasonable care, and prioritizing the best interests of the company and its shareholders. A partner who locks out another partner may be in breach of these duties. Furthermore, as a shareholder, you have certain rights, such as the right to inspect corporate records and participate in decision-making processes. If these rights are violated, legal action may be warranted.
  3. Mediation and Arbitration: Before resorting to litigation, it is often advisable to explore alternative dispute resolution methods, such as mediation or arbitration. These processes allow parties to work with a neutral third party to facilitate negotiations and reach a mutually acceptable resolution. Mediation and arbitration can be faster and more cost-effective compared to traditional court proceedings.
  4. Legal Action and Remedies: If mediation or arbitration fails or is not feasible, taking legal action may be necessary to protect your rights. Depending on the circumstances, potential legal remedies may include seeking injunctive relief to regain access to corporate premises or records, filing a lawsuit for breach of fiduciary duties, or pursuing a corporate dissolution or buyout. An experienced business litigation attorney, such as Falcon Law PC, can assess your specific situation and guide you through the legal process.

Conclusion: Being locked out of a corporation by a partner is a serious issue that requires prompt action. It is important to review corporate governance documents, understand your fiduciary duties and shareholder rights, and explore alternative dispute resolution methods before considering legal action. To ensure the protection of your rights and the best possible outcome, it is crucial to seek legal assistance from experienced professionals, such as Falcon Law PC. Contact Falcon Law PC at 1-877-892-7778 or via email at info@falconlawyers.ca.

For inquiries or further assistance, please contact us using the information below.

Talk to us now at

Book a consultation fast and easy

CALL NOW