When co-owners of a closely held business can no longer work together, the result is sometimes called a “business divorce” — a dispute over buyouts, control, and the fiduciary obligations owners owe one another. These disputes are distinct from ordinary commercial litigation and follow their own rules.
Kron & Card LLP represents shareholders, partners, and closely held businesses centralized in Southern California, with clients throughout the state, in resolving ownership disputes — and in structuring governance documents from the outset to make a dispute less likely.
We represent owners on every side of a business divorce.
Controlling owners seeking to buy out a departing or disruptive co-owner, or responding to a minority shareholder’s demand or lawsuit.
Minority shareholders and partners who have been frozen out of management, denied information, or treated unfairly by controlling owners.
Family- and founder-owned companies facing a deadlock between equal owners, or looking to put buy-sell provisions in place before a dispute arises.
California law gives a shareholder holding 50% or more of a corporation’s shares the right to seek voluntary dissolution, even over the objection of other owners. But dissolution is rarely what anyone actually wants. Corporations Code section 2000 gives the corporation itself, or the other shareholders, a powerful alternative: the right to avoid dissolution entirely by buying out the moving shareholder’s shares at fair value.
If the parties can’t agree on a price, the court can appoint three disinterested appraisers to determine fair value based on the company’s liquidation value, taking into account the possibility of selling the business as a going concern. We represent both the shareholders seeking dissolution and the company or co-owners looking to invoke a Section 2000 buyout to keep the business intact.
Our shareholder and partnership dispute practice covers:
Negotiating and litigating the terms and valuation of a departing owner’s buyout, whether voluntary or court-ordered.
Pursuing and defending claims that a co-owner or officer breached duties of loyalty and care owed to the company and other owners.
Resolving management deadlock between equal owners, including voluntary and involuntary dissolution proceedings.
Representing companies and shareholders on both sides of a statutory buyout proceeding to avoid dissolution.
Enforcing and defending against claims under partnership agreements, LLC operating agreements, and buy-sell provisions.
Pursuing and defending claims that a minority owner was frozen out of management, profits, or corporate information.
Options generally include negotiating a buyout of one owner by the other, invoking any buy-sell provisions in your governance documents, or, where no agreement is reached, pursuing or defending a dissolution proceeding. Which path makes sense depends heavily on your ownership percentages and existing agreements.
Not directly, absent a triggering agreement. But if a 50% (or greater) shareholder files for dissolution, Corporations Code section 2000 lets the company or other owners avoid dissolution by buying out that shareholder’s interest at fair value instead — effectively flipping the dynamic in the remaining owners’ favor.
Common examples include diverting business opportunities for personal benefit, self-dealing transactions, excluding a co-owner from management or financial information, and misusing company funds. Whether conduct crosses the line often depends on what your governing documents permit and what was disclosed to the other owners.
A well-drafted operating or shareholder agreement with clear buy-sell provisions, valuation methods, and deadlock-breaking mechanisms resolves most business divorces before they start. We regularly help business owners put these protections in place at formation or as ownership changes.
This page provides general information, not legal advice for any particular situation. Corporations Code procedures and outcomes vary with the facts of each dispute and your governing documents. Contact us to discuss your circumstances.
