When you go into business with a partner or group of shareholders, you expect that everyone will act in the company’s best interest. Unfortunately, that’s not always what happens. One of the most common problems we see in shareholder and partnership disputes is unfair competition, a situation where a partner uses the business’s resources, clients, or confidential information to benefit themselves at the company’s expense.
If you’re dealing with a partner who’s competing against the business they help own, the impact can be serious. Revenue loss, client confusion, damage to the company’s reputation, and internal distrust can quickly follow.
At Ayala Law, we work with Florida business owners every day who are trying to protect what they’ve built. Below, we break down what unfair competition looks like in the context of shareholder disputes, the legal rights you have, and the steps you can take to protect your business before things escalate.
What Counts as Unfair Competition in a Shareholder Dispute
When shareholders or partners compete with their own company, they may be violating several legal duties. Common examples include:
Using Company Information to Start a Competing Business
For example, a shareholder quietly opening a side company in the same industry, using your business’s strategy or proprietary knowledge.
Poaching Clients or Employees
If a partner reaches out to clients the business paid to acquire, or employees the business trained, this usually crosses a legal line.
Diverting Opportunities That Belong to the Company
Florida law imposes a “corporate opportunity doctrine,” which prevents insiders from taking a business opportunity for themselves if it rightfully belongs to the company.
Misusing Confidential Information or Trade Secrets
Pricing, formulas, client lists, operational methods, and proprietary materials cannot be exploited for personal gain.
Running Competing Operations During Company Time
Even if a partner claims they technically have the “right” to run another business, using your company’s funds, resources, or time is not permissible.
Most business owners know something feels “wrong” long before they understand the legal name for it. If you are seeing unusual client loss, unexplained dips in revenue, or secretive behavior from a partner, your instinct is likely pointing to something real.
When Can You Take Legal Action Against a Shareholder?
You generally have several legal options if a partner is competing against the business or violating their duties. These claims often fall under:
Breach of Fiduciary Duty
Shareholders, officers, and directors must act in the company’s best interest. Competing with the company usually violates this duty.
Breach of the Shareholder Agreement
Most shareholder agreements include clauses that prohibit competition, client poaching, misuse of information, or unauthorized use of company resources.
Violations of Florida Trade Secret Law
Under the Florida Uniform Trade Secrets Act, misusing proprietary information can lead to injunctions and damages.
Tortious Interference With Business Relationships
If a partner is actively undermining client relationships, this can be actionable.
Corporate Opportunity Claims
If an insider diverts a business deal to themselves, the company can seek damages or reclaim the opportunity.
Derivative Claims
In some situations, a shareholder can file a lawsuit in the company’s name when insiders harm the business.
If you believe a partner’s actions are causing measurable harm, speaking to a business litigation attorney is often the fastest way to understand your legal position and start protecting your assets.
How to Protect Your Business Before a Dispute Happens
Most business owners don’t realize how vulnerable they are until a dispute begins. Strong planning can prevent many of these issues. Here are some of the protections we often recommend to clients:
Include Clear Non-Compete and Non-Solicitation Clauses
These clauses should address client poaching, competing ventures, employee recruitment, and use of company information.
Strengthen Your Shareholder Agreement
Your agreement should define:
- Expectations for each shareholder
- Restrictions on side businesses
- Procedures for removing a shareholder
- Buyout terms
- Voting rules
- Confidentiality obligations
Protect Your Trade Secrets
Label proprietary information, require confidentiality agreements, and secure access to sensitive data.
Implement Boundaries Around Company Resources
Clarify what can and cannot be used by shareholders for outside work.
Require Regular Financial Transparency
Shareholders should not be able to hide competing ventures by manipulating financial reporting.
Strong contracts do not eliminate risk, but they dramatically reduce it. They also make litigation faster and less expensive if a dispute arises.
Signs That a Shareholder Dispute Is Developing
Business owners often tell us that they sensed something was wrong months before the actual conflict became apparent. Common red flags include:
- Clients quietly leaving without explanation
- A shareholder refusing to share financial information
- A partner starting a “side project” that looks suspiciously similar to the main business
- Employees mentioning unusual conversations with a partner
- A sudden breakdown in communication
- Unexplained declines in revenue
If this sounds familiar, it is better to address the issue early than wait until the damage is irreversible.
What to Do if a Shareholder Is Competing With Your Business
If you suspect unfair competition, here are immediate steps to take:
- Do Not Confront the Partner Without Legal Guidance: Anything said may later affect your legal claims.
- Preserve All Documentation: Emails, messages, contracts, financial records, and internal communications are often crucial evidence.
- Protect Customer Data and Internal Systems: Change passwords, audit access logs, and ensure that sensitive information is restricted.
- Review Your Shareholder Agreement With An Attorney: Your rights and remedies depend heavily on your specific contract.
- Get Legal Advice Early: Even if you decide not to pursue litigation, speaking with a lawyer helps you understand your leverage and options.
How We Support Businesses in Shareholder Disputes
Our firm represents businesses across Florida in disputes involving unfair competition, fiduciary breaches, partnership conflicts, and corporate governance issues. We understand how disruptive these disputes can be, especially for small and mid-sized businesses that rely heavily on their internal team.
We approach these cases with a focus on:
- Protecting the business’s financial stability
- Preventing further harm
- Resolving disputes efficiently
- Positioning the company for long-term security
If you believe a partner or shareholder is undermining your company, contact an experienced attorney in Miami at 305-570-2208.
You can also contact our team directly at: arianna@ayalalawpa.com
Schedule a case evaluation online here.
[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case].
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