Disputes between the owners can destroy a privately held business. In cases involving a family-owned business, they can destroy family relationships.
In a recent case, the giant cheesemaker Leprino Foods and its biggest shareholders fought off a challenge from two other co-owners who claimed they had been shut out of the business. The dispute pitted two women against their cousins and their 85-year-old uncle.
Pizza industry leader
Leprino Foods is not a household name, but its products are familiar to most Americans. The $5.5 billion company supplies the mozzarella for nationwide pizza chains including Domino’s, Pizza Hut and Little Caesar’s. By some estimates, 85% of the mozzarella in the United States comes from Leprino.
The largest shareholders in the company are 85-year-old James Leprino and his daughters, who together own about 75% of the company. The rest of the company was owned by Leprino’s brother, who died in 2018, leaving his shares to his own three daughters.
Two of those daughters filed suit against their uncle and their cousins, demanding a greater say in managing the cheese empire. A jury found against them.
Few of us are so fortunate to be co-owners of a $5.5 billion company, but the type of dispute that Leprino Foods faced is not uncommon among privately held companies.
The best way to handle this type of business leadership dispute is to stop it from happening in the first place.
Well-drafted partnership agreements and other founding documents can help a company avoid these disputes or at least minimize the damage they can do to the company.
Among other things, these documents should provide a process for resolving disputes between business partners. They should spell out who owns what, and what is expected of each of the co-owners.
They should also provide a process for reorganizing ownership in case one of the partners decides to leave or dies suddenly.
Of course, it may be impossible to completely avoid the possibility of conflict between business owners. The key is to resolve disputes with as little disruption to the business as possible — and, for family-owned businesses, that also means minimizing disruption to the family.
If these disputes can’t be avoided, it’s important for business owners to seek out help from experienced attorneys who understand the delicate issues involved.