What to Do When Your Business Partner Discloses Company Secrets

When you go into business with someone, trust is essential. Everyone involved in forming and growing a company needs to be able to keep important information behind closed doors. This is called “fiduciary duty,” and it’s generally included in every contract between business partners.

Whether you’re just starting out or your business is well established, it’s important to take time to consider what might happen if one of you commits a breach of your fiduciary duty. In other words, how will you handle it if you find out your business partner has been spilling company secrets? This could be to competitors, friends, or even family if it poses a risk to your business. Here are a few things you can do if your partner can’t keep secrets.

Check Your Contracts

If you have a partnership agreement in place, that’s your first step. If you’re still forming a company, make sure all partners sign such an agreement and that it includes wording to address fiduciary duty. In addition to specifically stating that partners are obligated to keep company business confidential, explicitly include that partners cannot start competing businesses.

Discuss the Issue

Early on in the relationship, have a proactive discussion about confidentiality and make sure all partners are on the same page. It isn’t too late to have that discussion even after you’ve learned of a breach. You may find that your partner did nothing wrong and the information leaked another way. A one-on-one will probably tell you everything you need to know about your partner’s stance on company secrets.

Reexamine the Partnership

After reviewing the contracts and discussing the issue, you’ll have the information you need to reassess the partnership. Was this a one-time slip-up that the partner truly regrets, or will there be trust issues moving forward? This is a good time to firm up your partnership agreement to highlight fiduciary duty and have all partners sign again.

Consider Legal Action

If you decide you can’t move forward, you’ll need legal counsel to end the partnership. The burden of proof will be on you, so it’s important to have witnesses or documentation if you plan to go through with ending the partnership. Your partner will have the opportunity to rebut the claim and present proof but if that partner is found at fault, you may also be due an award for any losses your business suffered as a result.

A breach of fiduciary duty in a partnership can be a damaging blow. However, if you have the right signed agreements in place from the start, you may be able to protect your business against any losses you’ll suffer. At the very least, you’ll be able to move forward with the understanding that what happens behind your office doors, stays behind those office doors.

Contact us today to prevent a larger issue in the event you find out your business partner is disclosing company secrets.

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