Immediate Actions for Owners Locked Out of Their Company

January 1, 2024
Regard Law Group

Imagine arriving at your office, ready to tackle the day, only to be denied entry.

It might seem surprising, but this can actually be the reality for company owners who’ve been locked out of their own business by a disgruntled business partner, another owner, or even the company itself. With tensions and emotions running high, it can be easy to make mistakes, but the stakes are too high for reckless action.

If you’re a Kentucky business owner facing this situation, here’s a step-by-step guide to navigating this challenging scenario, courtesy of Regard Law Group.

Step 1: Assess the Situation Calmly

Reacting impulsively can worsen the situation. Gather details – who locked you out? Why? Do you have any written agreements outlining ownership rights or access protocols (e.g., shareholder agreements, operating agreements)?

Step 2: Secure Legal Counsel

Consulting a Kentucky business attorney specializing in shareholder disputes is crucial. They can:

  • Review your company’s governing documents (operating agreements, bylaws) to understand your ownership rights and access privileges.
  • Analyze the facts– was the lockout a lawful action or a breach of fiduciary duty by another owner?
  • Explore short-term legal remedies, such as an injunction allowing you to regain access to your company property or allowing you access to specific documentation.

Step 3: Gather Evidence

Your attorney will advise on relevant evidence, which might include:

Step 4: Evaluate Negotiation or Litigation

Depending on the specific circumstances, your attorney may recommend pursuing:

  • Negotiation: If a productive working relationship with other owners is still possible, negotiation can be a cost-effective solution. A lawyer can help draft a formal agreement outlining future access rights and responsibilities.
  • Litigation: If negotiation is not an option, your lawyer will guide you through the litigation process. In Kentucky, business disputes are typically heard in Circuit Court.

Kentucky Considerations

While the following might not apply directly to your case, it’s important to understand the rights and options that owners have in Kentucky corporate lockout disputes.

  • Kentucky law allows for a “dissolution by decree of court” if a shareholder dispute significantly hinders the company’s operation.
  • In circumstances that feature a breach of fiduciary duty, misappropriation of funds, or other improprieties, the court might enter a decree dissolving the corporation, directing liquidation of its business and affairs.
  • Alternatively, the court might order a change in control of the corporation by mandating the sale of shares.

The Lexington-based legal team at Regard Law Group, PLLC, is here to help. If you need assistance with an issue concerning business law or any other legal matter, contact our office to schedule an initial consultation or get more information about our services. We’re available by phone 24/7.