Conflicts among co-owners, shareholders or partners can arise for all kinds of reasons.
Recently, you have begun to suspect that one of the co-owners has engaged in financial misconduct, such as embezzlement. You believe that they breached their fiduciary duty to the company by misappropriating company assets.
You worry that their actions will harm the business and cause financial losses for you and others with a vested interest in the company. You no longer trust this individual and it is in the company’s best interests to strip them of control over company assets and remove them from ownership.
How do you prove misconduct so that you can remove them from their role at the company without violating the company’s governing documents?
Perform a thorough internal review
The first step toward validating concerns of financial misconduct involves gathering company financial records. Performing an in-depth review could help you notice certain trends, like the partner in question consistently overpaying for services provided by one of their family members.
The larger your company is, the more likely it is you will need professional help. Bringing in a forensic accountant, for example, could help you continue focusing on operations as normal while gathering the evidence you need to take action. The less attention you draw to the investigation, the less likely it is that the person you suspect will have an opportunity to cover their tracks or destroy certain records.
Prepare your case before convening
You should have compelling evidence before confronting the wrongdoer. If you have a partnership agreement or similar documents creating obligations between you and your business partners, you may need to review those documents to determine what obligations you have to them and if their misconduct reduced those obligations.
When handled appropriately, claims of embezzlement or financial misconduct can help you remove a partner or co-owner from the company without opening the business to liability in the future.