What types of partnership disputes suit mediation?
- Profit and loss distribution disputes
- Disputes about decision-making authority and management roles
- One partner wanting to exit and disagreement on the buyout price
- Alleged breach of the partnership agreement
- Disputes over capital contributions or drawings
- Clients, intellectual property, or non-compete obligations on exit
Does a partnership agreement affect the mediation process?
Most well-drafted partnership agreements include a dispute resolution clause requiring the partners to attempt mediation before commencing legal proceedings. If yours does, check whether the clause specifies a particular process, mediator appointment mechanism, or timeframe — you must follow it, or risk breaching the agreement before you have even started.
If there is no written partnership agreement, state partnership legislation (which varies by state) provides default rules on how disputes are resolved and how a partnership may be dissolved. Seek legal advice on your state's applicable legislation.
Mediation vs dissolution proceedings
Partners who cannot resolve a dispute face two broad paths: mediation (aiming for an agreed outcome) or court proceedings to dissolve the partnership. Dissolution proceedings are expensive, public, and destructive to the business's goodwill. Many partnerships that reach mediation avoid dissolution entirely — the parties restructure the arrangement, execute a buyout, or agree a clean separation of clients and assets.
Who should attend the mediation?
All partners (or their authorised representatives) should attend with genuine authority to settle. Where the partnership has a business manager or accountant whose information is material to the dispute, they may also attend. Legal representatives often attend commercial partnership mediations but are not required — see our guide: can lawyers attend commercial mediation?
What outcomes can mediation produce?
- A revised partnership agreement with updated terms
- A buyout of one partner's interest at an agreed valuation
- A structured wind-down with agreed client and asset allocation
- A payment plan for arrears or disputed drawings
- A non-compete or client list allocation on exit
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