Effect of separation in Business Partnership with 3rd party
Our client (Kate) had supported her husband in commencing a waste disposal business. The business had grown substantially in the last few years and the husband had taken on a partner, who owned 50% of the equity in the business.
The Husband claimed that the business was valued at $3,000,000, but as his partner would not sell his share of the business, the value of the Husband’s share was reduced to only what a new partner would pay for it, and the remaining partner would have to decide who would be his new partner and how much that new partner would pay for his interest.
The Husband refused to force the partner to sell as he did not wish any bad blood between them.
Kate felt that the Husband’s had undervalued his share of the business and was not prepared for the Husband or his business partner to decide her fate.
We attempted to negotiate with the partner to value the business and either buy out the Husband’s share or to list the business for sale on the open market, but he refused to participate.
We commenced court proceedings and joined the Husband’s business partner to the proceedings, so he was forced to participate.
Orders were made for the business to be valued, and it was valued by a professional independent valuer at $5,000,000. The partner was given the option of paying the Husband out his 50% share at market value or selling the business on the open market. He did not have the funds to pay the Husband the sum of $2,500,000 so within 120 days, the business was sold to an existing client of the business for the sum of $5,000,000 and the $2,500,000 comprising the Husband’s interest was paid into trust.
Kate received 62.5% of the asset pool (as the parties had 2 older children on the spectrum who were cared for by the Wife) and the matter was settled at mediation.
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