The Shotgun Fund

Shotgun Triggers Custody Battle

Shotgun Triggers Custody Battle

March 2007

Five operating partners each owned an equal amount of a profitable manufacturing company in Toronto. It was growing quickly. But with growth came pressure to change. The five partners disagreed on how to move forward.

Three of the partners executed a shotgun clause against the other two. The shotgun forced the two partners to buy the three out or to sell to them. The price had been set by the three and was not unreasonable. However, finding $4 million and closing within 17 days over Christmas break was not easy.

The two partners found The Shotgun Fund and the deal closed.

Here the story turned nasty. The three partners who had pulled the shotgun and taken their $4 million set up in competition. They solicited customers, suppliers and employees. They copied designs and set up a plant.

They had a very hard time explaining it all to the judge, who enforced the non-compete. They were unsuccessful in stealing back what they had sold.

Perhaps owner-operators should be thankful when they find out - sooner rather than later - just how nasty some partners can be.

For a lighter look at partnerships, we hope you enjoy

Richard Reid and Jim Ambrose
The Shotgun Fund
(416) 367-3617
and for fun


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