What to do about partnership disputes? Legal analysis of withdrawal, auditing, profit distribution, and return of capital contributions.

Many people who encounter "partnership disputes" initially start their businesses with the beautiful vision of "everyone making money together," partnering with family and friends. However, when the realities of life arrive, they often face...Unclear accounts, uneven distribution of profits, and the other party's failure to perform.Even when you are disheartened and want toWithdrawalHowever, it was discovered thatThe money invested in the first place will never be recovered..

This article is written specifically for those of you who are currently mired in partnership issues. Combining relevant provisions of civil law with insights from court practice, it teaches you step by step how to protect your rights in the simplest terms.

If you have a partnership dispute and wish to withdraw from the partnership and get your funds back, please follow these steps:

The right to inspect accounts is an ironclad rule: According to Article 675 of the Civil Code, even if the contract states otherwise, you still have the right to check the accounts at any time.

Advance notice is required for withdrawal from the partnership: According to Article 686 of the Civil Code, a partnership with an indefinite duration must notify the other partners "two months in advance".

Withdrawal settlement is based on "present value": According to Article 689 of the Civil Code, the money you get back upon withdrawal from a partnership is based on the company's value "at the time of withdrawal," not on your initial investment.

Four Steps to Self-Rescue: Collect evidence → Send a letter for evidence preservation/lawyer's letter → Apply for mediation → File a civil lawsuit (requesting settlement and return of investment).

▍ Pain Point 1: Uneven distribution of profits and perpetually unclear accounts?

"We have customers every month, so why does the person in charge always say we're not making money?" This is the most common starting point in partnership disputes. Many partners responsible for executing business operations will refuse to disclose financial information, citing reasons such as "you don't understand" or "the accounts haven't been settled yet."

A lawyer's legal advice: You have absolute "right to inspect accounts".

Many partnership agreements deliberately stipulate that "accounts can only be audited at the end of the year" or "minority shareholders have no right to audit accounts."Legally, these agreements are usually invalid!

• Legal basis (Article 675 of the Civil Code):"Even if there is an agreement to object, a partner who does not have the right to execute partnership affairs may still check the partnership's financial status and inspect its books at any time."
• Practical operation: As a partner, you can request to see the bankbook and inventory details at any time. If the other party refuses, you can issue a formal letter requesting to inspect the accounts; if the other party continues to conceal information or even embezzles company funds, it may involve criminal charges.Breach of trustorEmbezzlement.

▍ Pain Point Two: Incompatible business philosophies, partners shirking their responsibilities and refusing to work?

We agreed to work hard together, but some people only contributed money without putting in the effort, or insisted on their own opinions on major decisions, causing the company to stagnate and we argued every day.

Legal Solution from Lawyers: Confirming Decision-Making Authority and "Dismissal" Mechanisms

• Legal basis (Articles 671 & 688 of the Civil Code): The day-to-day affairs of a partnership are usually decided by the partner in charge of execution. However, for major matters, unless otherwise stipulated in the contract, the law requires the consent of all partners. If a partner seriously breaches their obligations (e.g., intentionally damaging goodwill or embezzling assets), the other partners can, in accordance with Article 688 of the Civil Code, appeal through...With the unanimous consent of the other partners, he/she is "expelled" (legally termed: expulsion by declaration).They forced him to withdraw from the partnership.

▍ Pain Point 3: Feeling disheartened and wanting to "quit the partnership," but what if you can't get your money back?

This is where everyone's biggest pain lies: "Can't I just quit? Give me back the 1 million I invested!" Warning! This is a huge legal myth. Legal withdrawal from the partnershipIt's not about "returning the principal".Instead, it means "refunding the value after settlement".

Legal Advice from a Lawyer: The Correct Procedures for Withdrawal and Settlement

1. Legally expressing the intention to withdraw from the partnership (Article 686 of the Civil Code): If there was no agreement on the duration of the partnership, you must [do something - the original text is missing].Two months ago"Inform everyone that you are leaving the group. You can't just say you're quitting today and then demand your money tomorrow."
2. Initiating withdrawal settlement (Article 689 of the Civil Code):"Settlement between a withdrawing partner and their other partners shall be based on the state of the partnership assets at the time of withdrawal." This means that if you initially invested 1 million in the company and it now makes a large profit, your share may be worth 3 million, and you should take 3 million. Conversely, if the company continues to lose money or is even in debt, you may not get a single penny back.They even have to help pay off the debt proportionally!

▍ Four Self-Help SOPs Recommended by Lawyers in the Event of Partnership Disputes

If you are currently facing the above situation, please immediately stop the pointless verbal battles and take the following steps:

1. Collect and preserve evidence comprehensively:
   • Find the original "partnership agreement" (if there is no written agreement, LINE chat records or remittance notes stating "investment funds" can also serve as evidence).
   • Screenshot all conversations about accounts, arguments, and the other party admitting they didn't get a share of the money.
   • Keep bank transfer receipts.
2. Sending a registered letter/lawyer's letter: Stop arguing on LINE. Hire a lawyer to draft a professional legal letter, formally exercising your "right to inspect accounts" or expressing your "desire to withdraw and settle accounts." This will have clear legal "notification" effect and put significant psychological pressure on the other party, facilitating negotiations.
3. Request mediation from the township/city government or court: If you are going to file a lawsuit for time-consuming fees directly, you can first apply for mediation with the local mediation committee. With the assistance of a third party (or a lawyer), both parties can settle their accounts, part ways amicably, and sign a legally binding "mediation record".
4. File a civil lawsuit: If the other party avoids meeting or denies everything, the last resort is to file a civil lawsuit in court, with claims including "requesting cooperation in handling the withdrawal settlement" or "returning the partnership investment." If there has been misappropriation, a criminal lawsuit can be filed simultaneously to force the issue through legal means.

▍ Frequently Asked Questions (FAQ) about Partnership Disputes – Optimized for Search Engines

Q1: We only verbally agreed to the partnership and did not sign a written contract. Is this legally valid? A: It counts! According to Article 667 of the Civil Code, a partnership is established as long as both parties agree to "contribute capital to each other and jointly operate the business," regardless of whether it is in writing. However, "proving evidence" can be very difficult, so it is strongly recommended to use remittance records and screenshots of conversations to prove the existence of the partnership.

Q2: The other party says the company is losing money and refuses to share profits. What should I do? A: Exercise your "right to inspect accounts." Request verification of input and output invoices and bank statements. If the other party continues to refuse to provide these documents, you can request them through a certified letter, or even initiate legal proceedings to have the court order them to produce the accounting records.

Q3: I want to withdraw from the partnership, but the other partners won't allow it. Can I withdraw unilaterally? A: Yes. As long as the partnership agreement does not stipulate a specific duration, according to Article 686 of the Civil Code, you only need to notify the other partners "two months" in advance, and your withdrawal will automatically take effect upon the expiration of the specified time, without requiring their "approval".

Lawyer's concluding remarks: Partnership disputes often involve complex human nature and interests. Instead of getting bogged down in mutual blame and internal strife, it's better to address the issue at the level of legal and financial settlement as early as possible. Involving a professional lawyer early on to clarify accounts and rights and obligations is the best way to protect your hard-earned money.

Legal Counsel:https://fdlaw.com.tw/consulting/

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Frequently Asked Questions

When do businesses need a business lawyer?

It is advisable to seek consultation in advance when major contracts, shareholder disputes, partnership dissolution, investment disputes, debt collection, corporate governance or business criminal risks arise.

What is the difference between corporate legal counsel and individual legal representation?

Legal counsel tends to focus on long-term risk management and immediate consultation, while individual engagements are for handling specific disputes or litigation.

What should be done first in a shareholder or partnership dispute?

You should organize your investment records, contracts, company registrations, financial information, meeting minutes, and correspondence to determine the possible avenues for negotiation, litigation, or asset preservation.

Further Reading on Company Management and Business Law

If you are dealing with company, responsible persons, contracts, financial transactions, investigative, or litigation risks, it is recommended that you first organize the facts, documents, and potential legal proceedings together, rather than relying on a single keyword. The following content can help you explore related topics further and quickly determine your next steps.

Business criminal and criminal risks for company executives Contract review, English contracts and international trade How to choose a legal counsel for a company in Taipei and New Taipei City What to do about partnership disputes?

When does a company need legal counsel or a business lawyer?

It is advisable to seek consultation as early as possible when a company signs a major contract, introduces investors, has disputes with shareholders or partners, cannot collect payments, has employees leaving with documents, or faces litigation.

Can partnership or shareholder disputes be resolved through verbal negotiations alone?

You can start by negotiating, but you should simultaneously save records of investment, dividends, audits, meetings, messages, and accounting information to avoid being unable to prove your rights if negotiations break down.

Why is a business background necessary for corporate legal issues?

Corporate disputes often involve contracts, accounting, taxation, corporate governance, evidence, and negotiation. Lawyers who understand the transaction process are better able to propose actionable solutions.

If you need legal assistance to determine the next step, you can first organize the above documents and timeline, and then contact Fidelity Law Firm for assistance in assessing the direction of the process. Contact Fidelity Law Firm