Opinion

Published

Are you prepared for a business divorce?

5 Mins

Over the next few years, many people will start new businesses and form new partnerships and alliances. These are replete with risks and that is the nature of entrepreneurship. But there is one risk that is rarely spoken about.

Betrayal.

Betrayal of the trust and common purpose that once united business partners is, regrettably, not an uncommon occurrence. It is a traumatic event not dissimilar to an unpleasant divorce arising from an unexpected and intolerable infidelity.

The type of perfidy I’m referring to is where financial wellbeing is damaged through acts of personal, covert financial preference. It falls short of fraud, for which there are adequate criminal sanctions, but is no less painful to its victim.

The bloodiness of dissolving a debased business relationship is rarely considered at the time of its formation. Who contemplates the distress of a bitter divorce at the time of a marriage?

It is a difficult thing to propose. It implies that there is no mutual trust and understanding in the relationship and it is instead corrupted by unsettling doubt. The mere suggestion of mistrust can pollute the relationship in its infancy. People often suppress these instincts and remain silent only to be consumed later by regret.

Commercial relationships are no longer founded on trust but rely on obligations specified in formal documents. But is it really desirable that we replace our sense of moral obligation in business with contract law?

Some people are fickle. At the outset they may harbour no intention of deception – but circumstances change and the temptation of cash can mean that egalitarianism is abandoned in favour of greed.

Dissolving a partnership in a fractured shareholder relationship is difficult. You may not have the financial resources to acquire the offending person’s stake but find it impossible to dismiss them. The bonds that bind you both to the company are stronger than your desire to separate. Contrary to your wishes, the business may have to be sold or liquidated to fund a financial settlement.

But that isn’t the full extent of the damage. Duplicity by someone you regarded as a friend, generates intense emotional distress and scar tissue long after the financial impact has dissipated. It cuts to the bone of trust in your judgement of people.

This is an inhospitable landscape to contemplate at any time but, as the economy moves out of recession, more of you will start businesses and enter into these relationships. You can never be certain that your business partner will always return the trust and respect that led you to form the relationship.

What can I say to those inclined to wrongdoing? You may have the criminal’s callous disregard of the psychological effects that you inflict on your erstwhile friend. The distress of your victim may even elevate your sense of power – but this transitory “high” will be followed by a “down” of guilt and shame and abhorrence of what you have become. The scar you bear may be deeper than that of your victim.

There is no way to make sure your partner will never betray you. All that you can do is insist that agreements are put in place that protect your interests – the equivalent of a corporate pre-nuptial agreement.

But I do suggest a somewhat cynical rule. By all means make friends with your business partner – but be cautious of converting a friend into a business partner because you feel able to rely on their integrity. Life, money and other people’s bitter experience suggests that you may be risking your emotional health and potential wealth.

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