(Spoiler alert: This post includes a discussion of the plot from the episode of The Good Wife that aired on Sunday, May 18, 2014.)
1. Breaking up is messy.
Just like breaking up a family can be stressful and devastating to all those involved, a business break-up can be emotionally and financially devastating. Often, those who have the power or the capital want to break away from other members in the organization. The break up itself may negatively affect the value of the enterprise as a whole, especially if it is done as a power play driven by ego rather than as a rational decision for the benefit of the business as a whole.
2. Have an exit plan ready at the beginning (think of it as a business pre-nup).
On The Good Wife, Diane Lockhart had other options available to her: to run for State’s Attorney (with the Governor’s support) or, perhaps, to bring her $38 million in yearly billing to Alicia Florrick’s firm. Often, in real life, those types of options don’t conveniently present themselves at the time of the business break up. That’s why it is important to think about the potential need to terminate the enterprise at the time that you are putting it together. A careful corporate attorney can assist you with structuring your business so that there is a clear exit path that causes the least amount of disruption to the business.
3. Understand the rights and remedies afforded to all members of the organization.
You started the business and you own the majority of the shares or units. That means you have total control over the life of the business, right? As Diane Lockhart found out, just because your name is on the door doesn’t mean you can’t be locked out. Depending on how your business is set up, there may be an Operating Agreement or Bylaws that dictate who may move to dissolve the business and under what circumstances.
If Diane had acted sooner, she may have been able to amend the governing documents to prevent Canning’s ability to dissolve the firm. The sooner you consult with a business divorce attorney when faced with a potential business disruption, the better. It may not have made good television, but it will help lessen the drama in your reality.
4. Dissolution is the nuclear option, but it can be useful for minority members.
If you are a minority member or interest-holder, the ability to move for dissolution is an important power that you can use to keep the majority interest-holders from impairing your interest.
From the point of view of the majority member (such as Diane Lockhart), it is a scary thought that someone who became a partner “just four weeks ago” could have the power to destroy the business.
This is important to consider when you are bringing investors into your business and it is important to keep in mind when the minority interest-holders are unhappy with the direction of the business.
5. It’s important to have a good business divorce attorney in your corner, even if you are just planning to enter into a new business relationship.