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Obstinate Partner |
Dear Dave One of my two other partners did not want to increase the LOC. The bank offered to split the personal guarantee into three equal $100k portions for each partner (which basically did not increase our individual personal guarantee amount). After months of painful discussions we renewed the LOC at the $100k limit. Last November, our LOC was once again up for renewal and the topic of raising the LOC limit came up. The reluctant partner proposed that we all sign an amended shareholder agreement with several stipulations that clearly showed a lack of trust in other partners as a pre-condition to his signing the new, increased LOC. Needless to say we did not agree to sign this amended agreement and after months of putting our banker off (to the point where it is embarrassing) the same partner has now stated that he is not going to sign any LOC. We’re stuck. I feel that not maintaining a standby LOC is not in the best interest
of the firm. Our options as I see them are to have two of the three partners
sign the LOC and make adjustments to the role/authority/participation
in the profit sharing of the non-signing partner, or remove the partner
not willing to sign LOC. Situations such as this, by the way, are exactly why key documents such as a thoughtfully prepared set of corporate by-laws and buy-sell agreements between owners are so important. The path to impasse resolution (legally at least) should be clearly spelled out in your governing documents.
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