How to Exit a Business Partnership in a Company Structure: The Basics

When your “partnership” operates through a company, leaving isn’t as simple as walking away. Your interest is tied up in shares, director roles, and company obligations. Exiting cleanly means addressing ownership, control, and liability — and documenting each step properly.

Clarify Your Role and Rights

First, understand how you’re involved. You may be:

• a shareholder, owning part of the company;

• a director, responsible for management and compliance; and/or

• an employee or contractor, working in the business day to day.

Each role carries different rights and obligations. Before you make any move, identify what you legally can — and must — do.

Review the Company Documents

Key documents will guide the process:

• the shareholders’ agreement (if you have one);

• the company constitution; and

• any employment or contractor agreements.

A shareholders’ agreement often sets out how an owner can exit, including valuation methods, buy-out processes, and restrictions on competing after leaving. Without one, you’ll rely on the Corporations Act 2001 and general company law — which may not reflect your intentions.

Value and Transfer the Shares

If another shareholder (or the company itself) is buying your shares, the price and timing must be agreed. This might involve:

• an independent business or share valuation;

• tax advice on capital gains or dividends; and

• preparation of a Share Sale Agreement to document the transfer.

Resign as Director — But at the Right Time

If you’re also a director, resignation is an important step — but timing matters. Resigning too early can weaken your position if the exit terms aren’t yet settled. You may lose access to company information, control over decisions, and leverage in negotiations.

Before resigning, consider:

1. whether key documents are finalised and signed;

2. whether company liabilities and guarantees are resolved; and

3. whether your ongoing involvement is still needed to protect your interests.

When the time is right, your resignation should be in writing, and the company must lodge the change with ASIC within 28 days. You should also confirm your removal from bank accounts and other authorisations.

Address Contracts and Clients

Like any business transition, exiting a company affects customers, suppliers, and staff. Check:

• whether your name appears on key contracts or guarantees;

• what client relationships or responsibilities will transfer; and

• whether you’re bound by confidentiality or restraint clauses.

You’ll also want to ensure you’re released from any personal guarantees given to landlords, lenders, or suppliers.

Protect Your Future Interests

A proper exit protects both sides. That usually means documenting the deal with:

1. a Deed of Release (to prevent future claims);

2. an Indemnity (allocating past and future liabilities); and

3. a Restraint of Trade clause, where appropriate.

Written documents will help keep things clear.

Final Thoughts

Exiting a company partnership involves more moving parts than a traditional partnership. Ownership, governance, and risk all need careful management. With planning and legal guidance, you can leave cleanly and protect what you’ve built.

Need Help Exiting a Company Partnership?

If you’re thinking about exiting a business partnership that operates through a company, get clear on your rights and obligations before taking action.

Joe Kafrouni, an Accredited Specialist business lawyer in Brisbane, can help you review your shareholder rights, negotiate your buy-out and prepare the necessary documents to achieve a smooth, well-protected exit.

You can book an initial consultation below.

Disclaimer

The information provided by Kafrouni Law is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Law makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information.

Liability limited by a scheme approved under professional standards legislation.

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