Resolving Business Owner Disputes Where There Is No Formal Agreement: Top 10 Tips

Disputes between business owners are always difficult. They are even more complex where there is no shareholders’ agreement, LLP agreement or partnership agreement to provide a clear framework for control, decision-making or exit.

In these situations, the law rarely provides neat answers. Outcomes are instead driven by evidence, conduct, commercial leverage and, often overlooked, the practical realities of funding a solution. Having advised on many such disputes over the years, the following are my top ten tips for navigating this territory pragmatically and effectively.

1. Identify What the Legal Relationship Actually Is (Not What Anyone Assumed)

A recurring problem in these disputes is that the parties believe they “know” what their relationship is. In truth, where there is no agreement, the court will determine the relationship based on conduct, documentation and commercial reality, not labels.

Two individuals may consider themselves equal co-owners, but legally they may be nothing more than directors owing duties to the company rather than to each other. Conversely, profit sharing and mutual control can give rise to an implied partnership, even where a company structure exists.

Getting this analysis right at the outset is fundamental, as it defines both the available remedies and the strategic landscape.

2. Reconstruct the Commercial Deal from the Evidence Trail

Without a formal agreement, disputes often turn on a forensic reconstruction of what was agreed, or at least what was represented. Emails, messaging apps, pitch materials, bank mandates and Companies House filings all assume heightened importance.

Courts are rarely persuaded by isolated statements. They are far more influenced by patterns of behaviour over time, particularly where reliance and mutual understanding can be demonstrated.

This is why informal arrangements, while expedient at the start, often carry hidden risk years later.

3. Understand the Limits of Company Law Protection

Many business owners assume that company law will provide a safety net. In reality, statutory protections are blunt instruments, particularly where there is no contractual overlay.

Unfair prejudice claims can be effective, but they are expensive, fact-sensitive and far from guaranteed. They are not a substitute for rights that were never agreed.

A realistic appraisal of what company law can, and cannot, achieve is essential before positions harden.

4. Conduct Matters More Than Most Owners Expect

In disputes without agreements, conduct frequently becomes decisive. Who controlled the bank account? Who made decisions unilaterally? Who took remuneration, and on what justification?

Equally, parties often underestimate how closely their own behaviour will be examined. Aggressive tactics or exclusionary conduct can quickly undermine an otherwise strong position, particularly where equitable remedies are sought.

Measured, disciplined behaviour often creates more leverage than overt confrontation.

5. Do Not Ignore Trust and Equity-Based Arguments

Where strict legal rights are limited, equitable principles can sometimes fill the gap. Constructive trust, resulting trust or proprietary estoppel arguments may arise where one party has contributed capital, assets or effort on the basis of shared assumptions.

These are nuanced claims that require careful handling. When deployed properly, they can materially shift leverage; when advanced poorly, they can weaken credibility.

6. Deadlock Is Often a Source of Leverage, Not Just a Problem

Deadlock is frequently viewed as a failure state. In practice, it can be a powerful commercial lever. Where neither party can move the business forward alone, pressure builds quickly – operationally, financially and reputationally.

Understanding how deadlock affects customers, staff, funders and suppliers can be just as important as understanding the legal position.

In many cases, the inability to continue trading effectively becomes the catalyst for resolution.

7. Be Realistic About What a Court Will Actually Order

Courts are reluctant to force parties to remain in broken commercial relationships. They will not rewrite a bad bargain simply because it later proves inconvenient.

As a result, many disputes ultimately resolve around exit, separation and valuation, rather than declarations of right and wrong. Clients who approach the process with a clear understanding of likely outcomes are far better placed to reach sensible settlements.

8. Valuation Is Important – but Funding Is Often Decisive

Valuation is frequently seen as the main battleground. In reality, even where a valuation can be agreed or imposed, the ability to resolve the dispute through a buy-out will often hinge on something more basic: cash.

The critical questions are usually whether the business, or the remaining owner, has sufficient readily available cash or assets to fund:

• an initial completion payment; and
• any deferred consideration required to bridge the gap between affordability and value.

Deals fail not because parties disagree on value, but because the proposed structure is simply unfinanceable. A sophisticated strategy looks at valuation and funding capability together from the outset.

9. Use Negotiation as a Strategic Tool, Not a Last Resort

In the absence of a governing agreement, litigation outcomes are inherently uncertain. This makes structured, informed negotiation particularly powerful.

The strongest negotiations are grounded in evidence, commercial pressure points and financial reality – not emotion or principle alone. Timing, tone and framing often determine success as much as legal merit.

10. Treat the Dispute as a Hard Lesson in Risk Management

Finally, these disputes highlight an uncomfortable truth: informal arrangements only work while relationships do. Once trust breaks down, the absence of documentation almost always benefits one party more than the other.

Resolving the immediate dispute should be paired with ensuring that any future ventures are properly structured from the outset — not as an administrative exercise, but as a core element of commercial risk management.

How We Can Help

Business owner disputes without formal agreements require judgment, experience and a firm grasp of commercial reality. If you are facing such a dispute, early strategic advice can make a decisive difference to both outcome and cost.