Business partnerships are not unlike marriages, with individuals relying on each other to make the best decisions for everyone involved. After all, there is something that gets noticed in someone who is chosen as a business partner. But business relationships, like any other, can grow sour, forcing those involved to evaluate and make changes.
Taking action when a conflict of interest in a Houston business occurs is essential. Addressing these conflicts is best approached at the beginning of the relationship to prevent future hardships and disputes.
Refer to Established Agreements
Successful businesses have a plan for worst-case scenario situations. A business partnership agreement is essential to navigate times when even the most solid partners are not on the same page. Employee handbooks and stakeholder guidelines are other ways to clearly define what is expected and inappropriate in the business relationship.
These moral and ethical missteps can damage a business’s reputation, financial stability, and its very existence. Partners in a business relationship are the fiduciaries of each other. Fiduciary duties include the duty of:
- Good faith
- Loyalty
- Care
- Full disclosure
Clearly outlining fiduciary duties in a partnership agreement is vital. Our legal team can ensure your contracts are appropriate and help you when conflict arises.
Recognizing a Conflict of Interest
A Texas business conflict of interest occurs when a partner, stakeholder, or employee seeks personal gains over a company’s best interests. Their actions often lead to unbiased decisions and poor judgment, poorly affecting the business or company they are connected with. These actions can have legal consequences if they are carried out, but staying aware of these conflicts can prevent them from occurring, providing valuable protection for your business.
Common Business Conflicts of Interest
Again, addressing these common conflicts of interest in a business agreement defines acceptable business practices and ensures a pathway for resolving these conflicts effectively.
Self-Dealing
Using knowledge of a company’s financial standing or accessing business finances for personal gain instead of the best interests of a business and / or its clients is one of the most prevalent conflicts of interest. This conflict of interest involves illegal actions.
Insider Trading
Buying or selling the securities of a company that are publicly traded while benefiting from information that is not public knowledge is considered insider trading.
Competing Employment
Working with another business or organization directly competing with a business or owning a competing business refers to outside employment. Including non-compete agreements in business partnerships can address this conflict of interest before it becomes a problem and address the steps to be taken if it occurs.
Gifts
Items given as gifts from a company can be used to influence business partners in their purchasing decisions. These purchases may often incur more expense for a business when more affordable options are available, but as reciprocation for the gift, the partner chooses the company’s product.
Gifts often seem harmless but can be costly to the business. Ensuring a system of checks and oversight in purchasing is essential to prevent gifts from becoming a conflict of interest.
Nepotism
Another common conflict of interest is hiring or favoring family members to perform a role in a business or utilizing the services of a family member’s business to supply services or goods to the business without actively seeking out other services or goods that may provide more benefits or be more cost-effective options for a company. Government entities generally prohibit this practice, and many businesses have policies preventing it.
Addressing a Conflict of Interest in Business
Establishing partnership agreements at the inception of business has been mentioned. Critical clauses to include that can address conflicts of interest include:
- Dispute resolution procedures and disciplinary actions
- A summarization of potential conflicts of interest and a means of resolving each
- Each partner’s decision-making powers
- Acceptable forms of compensation and benefits
- Non-compete clauses
- Dissolution guidelines
Conflicts will happen in a business relationship. Successfully navigating these conflicts takes preparation and work.
Never Procrastinate
Addressing a conflict of interest can be uncomfortable, but sweeping the issue under the rug can be damaging to the partnership and the business. Identify the problem and have a conversation about concerns. Offering possible solutions helps find resolution.
Work With a Mediator
A mediator should be skilled in working through conflict resolution, offering unbiased ideas and creative solutions to the problems that can be solved and serving to prevent the same issues from reoccurring. However, some of the conflicts of interest mentioned are illegal actions that could pose legal risks for other partners when the behavior is not dealt with immediately.
Seek Legal Representation
Hiring personal legal representation is vital for guidance and protection in Texas business conflicts of interest. When couples divorce, each spouse retains personal legal representation to speak for their needs. In a business partnership, this legal relationship should be developed as part of entering into a business to protect your best interests throughout the relationship.
There are essential services a Houston commercial litigation attorney can provide. A review of all contracts by a commercial litigation attorney in Houston is a proven method to certify that needed clauses are included in agreements between business partners. This review can weigh the equality in contracts and identify loopholes that can become problematic. Legal representation during partnership disputes and mediation interventions can buffer emotionally charged interactions.
When laws have been broken, or a business relationship is beyond repair because of a business conflict of interest, a Texas commercial litigation attorney will assist you with the complex decisions that accompany a business divorce to help you navigate beyond the current business relationship into a successful business future.
Exceptional Legal Guidance in Houston Commercial Litigation
Efficiently working to correct a business conflict of interest prevents problematic behaviors from spilling over into a business, destroying the hard work and dedication that has gone into building a successful company. Secure your business’s future by working with a dedicated team of Houston commercial litigation attorneys who stand beside you in accomplishing your goals and building a more substantial organization. Berg Plummer Johnson & Raval, LLP will diligently tackle any concerning business matter or conflict of interest.