One or more problems occur when one of the business partners is removed from the corporate bank account. Even adequately designed partnership agreements frequently fail to specify the terms and conditions under which a partner may remove another partner from the bank account or the business. When there is no documented partnership agreement, the same issue arises. In both circumstances, the legality of the action may be questioned. However, there is a difficulty that comes before this one. Even if the partnership agreement stipulates the circumstances under which a firm may remove a partner from the company’s bank account, the bank may refuse to do so without that partner’s consent.
Joint Business Accounts
When a person’s name is removed from a business account, that individual is no longer personally responsible for the account. Instead, creditors are authorized to initiate lawsuits against everyone on the account if the debt isn’t paid. Therefore anyone listed on company loans shares liability for the obligation. The stakes aren’t nearly as high on shared company checking or savings accounts. People who share a combined company bank account, on the other hand, are collectively responsible for certain transactions such as overdrafts. While debt is owed, banks and creditors are often unwilling to remove names from a business loan account. It’s in the bank’s best interests to hold as many people accountable as possible for the debt.
Examine any company loans or credit accounts that bear the name of the person you want to freeze. Negotiate the removal of a name from the account with the creditor. The bank must recognize you as the primary account holder or a business owner to do so. Before deleting the name, the bank may request further collateral or the account to be settled in full.
To remove the name, adhere to the terms of the signed agreement. Pay the sum in full or in part, or put up extra collateral, such as real estate or a personal retirement savings account.
Call the bank and speak with customer service to remove an authorized signer from a checking or savings account. Tell the bank you want to delete a name from the account and follow the written steps. Alternatively, you can go to a bank branch with the person who has to be removed from the account. Then, with the assistance of a customer support agent, finish the activity while displaying identification.
Dissolving Partnership
So long as the partnership is in business, the only method to stop a business partner from acting in a way that is detrimental to the partnership is to seek a remedy in court. When presented with an injunction against a partner, the bank may grant it while refusing to enable that partner to withdraw funds. They may, however, refuse to do so, or they may completely freeze the account while waiting for the court’s decision. A court can only dissolve the firm if it is registered with the Registrar of Firms. As a result, an unregistered partnership firm cannot be dissolved by a court.
Unless the partner’s behaviour reaches the level of criminal behaviour, dissolving the partnership may be the wisest option at that point. Unless the partners can agree on ending the business or having a dissolution agreement in place, terminating the partnership may require court intervention, which is time-consuming and costly. Each state’s legislation determines the partners’ obligations in a court-supervised closing. You may want to start a court-supervised dissolution under the advice of your business attorney to limit your responsibilities, especially if the closing is contested.
Look for a Compromise
When business partners have substantial problems, they may consider taking legal action to settle a dispute in one or more partners’ favour and against others or dissolve the company entirely. However, it may become evident at some point that the court solution is more time-consuming and expensive, in which the two parties spend the majority of their shared assets squabbling. If you encounter a situation that isn’t addressed in your partnership agreement, or if you don’t have one in the first place, you can still try to reach an agreement. Negotiation is about coming up with a solution that you and your partner can live with. Mediation is another method of resolving disputes that may save you money.
Conclusion
There are various reasons you might want to freeze your business partner out of an account, and we have discussed how to do so above. However, the most viable way is to let the Court intervene.
You should definitely check out how you can avoid a Bank account freeze.
