Sumir and Pete each operated businesses selling business communication equipment. Sumir's business was incorporated and Pete worked as a sole proprietor. Each promoted different lines of business equipment. The two friends were discussing business one evening when it occurred to them that they could pool their resources and work together for greater combined profit.
Pete decided to combine his sole proprietorship with Sumir's corporation in return for an equal share of Sumir's business shares. They then combined their inventories. Sumir assumed Pete's accounts receivable and payable and line of credit. Pete obtained signing authority from the bank for cheques drawn on Sumir's business accounts. Pete also brought his client base and line of products with him to the venture.
Some time after they had combined their businesses, Pete and Sumir began having disagreements about certain business matters. In particular, they could not agree on a uniform marketing plan or customer territory. Most notably, they could not agree on an appropriate division of commission based on who provided what client base and, making matters worse, Pete had little cash to inject into the business. These difficulties occurred before Pete and Sumir's solicitor had been able to transfer to Pete his equal share of stock.
The business was dissolved, and Pete sought an equal share of profits and capital. Discuss the legal issues which will be raised by the parties. What would be the likely outcome should litigation ensue?

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The Answer of Sumir and Pete each operated businesses selling business communication equipment. Sumir's business was incorporated and Pete worked as a sole proprietor. Each promoted different lines of business equipment. The two friends were discussing business one evening when it occurred to them that they could pool their resources and work together for greater combined profit.
Pete decided to combine his sole proprietorship with Sumir's corporation in return for an equal share of Sumir's business shares. They then combined their inventories. Sumir assumed Pete's accounts receivable and payable and line of credit. Pete obtained signing authority from the bank for cheques drawn on Sumir's business accounts. Pete also brought his client base and line of products with him to the venture.
Some time after they had combined their businesses, Pete and Sumir began having disagreements about certain business matters. In particular, they could not agree on a uniform marketing plan or customer territory. Most notably, they could not agree on an appropriate division of commission based on who provided what client base and, making matters worse, Pete had little cash to inject into the business. These difficulties occurred before Pete and Sumir's solicitor had been able to transfer to Pete his equal share of stock.
The business was dissolved, and Pete sought an equal share of profits and capital. Discuss the legal issues which will be raised by the parties. What would be the likely outcome should litigation ensue?

Sumir and Pete Each Operated Businesses Selling Business Communication Equipment