Disputes Between Business Partners in Chile: Causes, Legal Options, and How to Resolve Them

Disputes between business partners are among the most complex crises a company can face. What begins as a difference of opinion over the direction of the business can quickly escalate to paralyze management, compromise finances, and, in the most serious cases, destroy a company that took years to build. This article explains why these disputes arise, what legal options exist to resolve them, and what measures can be taken to prevent them.

1. Why Do Partner Disputes Arise?

The most common causes are not usually legal in origin, but strategic and relational. The most frequent include:

Disagreements over the direction of the business. Partners may have different visions of where the company should grow, what risks to take, or how to distribute profits. What was once a shared vision can diverge significantly over time.

Imbalances in dedication and contribution. When one partner feels the other is not contributing what they should — whether in time, capital, or management — the relationship deteriorates. This asymmetry is especially critical in companies where all partners work actively in the business.

Lack of clarity in the bylaws or shareholders' agreement. Many disputes are not about facts, but about rules. Who has authority to sign? How are decisions made when there is a deadlock? Can a partner sell their stake to a third party without the others' consent? If the documents do not address these questions, the dispute has no clear answer.

Personal circumstances that affect the company. A divorce, an inheritance, the entry of a new investor, or simply a partner's personal burnout can bring external tensions into the company.

Abuse of position or overreach of authority. When a managing partner makes significant decisions without consulting the others, enters into related-party transactions on terms unfavorable to the company, or withdraws funds irregularly, the dispute tends to become judicial.

2. The First Step: Understanding What Type of Company Is Involved

Not all corporate disputes have the same solutions. The applicable legal framework depends on the type of company:

Sociedad por Acciones (SpA). One of the most widely used corporate forms in Chile, particularly among entrepreneurs and investors. Its bylaws can — and should — include specific mechanisms for resolving internal disputes: special quorums, arbitration clauses, preferential purchase rights, and procedures for a partner's exit. In the absence of statutory regulation, disputes can become very difficult to manage.

Sociedad de Responsabilidad Limitada (SRL). As a general rule, the transfer of equity interests requires the unanimous consent of all partners (art. 4° Law N°3.918). This means a partner who wants to exit may become trapped if the others do not consent to the transfer. However, this rule can be modified by agreement — and therein lies the preventive solution: establishing exit mechanisms in the bylaws or partners' agreement from the outset.

Closely Held Corporation (Sociedad Anónima Cerrada). Governed by its bylaws and, subsidiarily, by Law N°18.046. One important feature: the board of directors of a corporation can only be removed in its entirety by the shareholders' meeting (art. 38, Law N°18.046), not on an individual basis. This limits options when the dispute involves a specific director.

3. Legal Options for Resolving the Dispute

Once a dispute has arisen, several paths are available. The right choice depends on the severity of the conflict, what the corporate documents provide, and what each party is trying to achieve.

Direct Negotiation and Out-of-Court Settlement

This is the first option and, when it works, the most efficient. A negotiated agreement between the parties — ideally with legal counsel on both sides — can result in a restructuring of the company, a purchase of equity interests, or an orderly dissolution, without the costs and delays of litigation. The advantage is that the parties retain control over the outcome. The disadvantage is that it requires a willingness to engage in dialogue, which is not always present.

Mediation and Arbitration

If direct negotiation fails but there is still a will to resolve the dispute without going to court, mediation and arbitration are highly recommended alternatives in corporate disputes.

Arbitration is especially relevant when provided for in the bylaws or shareholders' agreement. When the bylaws are silent on the matter, the law does not leave the dispute without a forum: article 4 N°10 of Law N°18.046 establishes that, in the absence of a statutory provision, disputes between shareholders, or between shareholders and the company, shall be submitted to an arbitrator acting in equity (árbitro arbitrador). This is a statutory default rule worth knowing.

There is also a distinction with important practical consequences: the arbitrator designated in the shareholders' agreement and the arbitrator designated in the bylaws are not interchangeable. Matters of corporate public policy — such as the dissolution of the company — fall within the exclusive jurisdiction of the arbitrator under the articles of incorporation or bylaws, not the shareholders' agreement arbitrator. Furthermore, article 125 of Law N°18.046 restricts access to ordinary courts — not only for those who hold the dual role of director and shareholder, but also for shareholders whose shares directly or indirectly exceed 5,000 UF in book or market value at the time of the claim. For these shareholders, statutory arbitration is the mandatory route.

Mediation seeks an agreement between the parties with the support of a neutral third party, without an imposed decision. It is useful when the business relationship has value and the parties would prefer to preserve it.

Challenge of Corporate Resolutions

When a managing partner has made decisions without the necessary authority, falsified meeting minutes, or approved resolutions under irregular circumstances, those acts can be challenged in court. The applicable deadlines vary depending on the nature of the nullity invoked — absolute or relative — and the specific act involved. It is therefore advisable to assess the situation promptly rather than assume that time is not a factor.

Removal of the Administrator

In SpA and SRL companies, partners with the required quorum can remove the administrator or general manager when grounds exist. In corporations, however, the board of directors can only be removed in its entirety by the shareholders' meeting (art. 38, Law N°18.046); individual removal of a director is not available. If the bylaws do not properly regulate this process for each type of company, the removal itself can become a source of litigation.

Dissolution and Liquidation

In the most serious cases — when the company is paralyzed, the partners are irreconcilable, and the business can no longer operate — dissolution may be the only viable outcome. It can be agreed voluntarily among the partners or, in certain circumstances, requested through the courts.

In closely held corporations, however, judicial dissolution is not available for every partner dispute: the law reserves it for situations of a certain gravity — serious violations of the law or regulations causing harm, fraudulent management, or other irregularities of comparable severity (art. 105, Law N°18.046). Furthermore, only shareholders representing at least 20% of the company's capital can petition for judicial dissolution. It is not, therefore, a remedy available for minor disagreements.

It is also important to distinguish between dissolution and liquidation: they are separate processes. A dissolved company does not immediately cease to exist as a legal entity. It continues under that capacity for the purposes of liquidation, and must add the words "en liquidación" (in liquidation) to its name (art. 109, Law N° 18.046). During that period, the company may only carry out acts that directly facilitate the liquidation, which significantly restricts its operational capacity.

4. Liability of the Managing Partner

A critical issue in corporate disputes is determining whether the person managing the company incurred liability toward the other partners. The scope of that liability varies by company type.

In corporations, article 41 of Law N°18.046 requires directors to exercise the care and diligence that persons ordinarily apply to their own affairs, and establishes joint and several liability for losses caused by willful or negligent conduct. Article 42 sets out specific prohibitions related to conflicts of interest, use of privileged information, and transactions harmful to the company's interests. An additional element of practical significance: article 45 of the same law establishes a presumption of liability against directors in certain cases — including the approval of related-party transactions in violation of article 44. This presumption shifts the burden of proof and significantly facilitates a liability claim against the offending director.

In SpA and SRL companies, these duties are not developed in as much detail in the applicable legislation. In the SRL, they are governed subsidiarily by the rules applicable to general partnerships. In practice, the determination of administrator liability in these company types depends to a greater extent on the content of the bylaws and the shareholders' agreement — which reinforces the importance of drafting them carefully from the outset.

5. The "Shotgun" Clause and Other Exit Mechanisms

In comparative corporate law — and with growing application in Chile — shareholders' agreements include specific mechanisms to manage a partner's exit when there is disagreement:

Right of first refusal. Before selling to a third party, the partner who wants to exit must offer their shares or equity interests to the other partners on the same terms. This protects the ownership structure and prevents the entry of unwanted parties.

Drag-along clause. Allows the majority partner to require the minority partner to sell on the same terms when a third party makes an offer to acquire a controlling stake or the entirety of the company. This facilitates company sale transactions.

Tag-along clause. Protects the minority partner: if the majority partner sells their stake to a third party, the minority partner has the right to sell on the same terms.

Shotgun clause or reciprocal offer. One partner offers to buy the other's stake at a set price; the other may accept the sale or, alternatively, buy the first partner's stake at that same price. Its validity and enforceability in Chile has been recognized in arbitration, including the counter-offer-at-equal-price mechanism. It is a tool that incentivizes fair proposals and resolves deadlock situations without the need for court proceedings.

One important caveat: in publicly traded corporations (sociedades anónimas abiertas), the bylaws may not include restrictions on the free transfer of shares (art. 14, Law N°18.046, as amended by Law N°20.382), and shareholders' agreement provisions restricting transfers are unenforceable against third parties, though valid between the parties that signed them.

The absence of these mechanisms in corporate documents is, in many cases, the reason partner disputes end in lengthy and costly litigation.

Summary: The Critical Points

If you are facing or anticipating a corporate dispute, these are the issues you cannot afford to overlook:

1. Review the bylaws and shareholders' agreement before taking any action. The rules of the game are already written — or they are not, and that is equally important information.

2. Document everything. Emails, meeting minutes, financial statements, and cash records are the foundation of any legal strategy.

3. Act promptly if there are irregularities. Deadlines to challenge corporate resolutions vary depending on the nature of the action, and time should not be allowed to pass without legal advice.

4. Evaluate the most appropriate path based on your objective: do you want to remain in the company, exit on fair terms, or dissolve? Each objective calls for a different strategy.

5. Seek legal advice early. The worst time to consult a lawyer is when the dispute has already escalated and positions have become entrenched.

Frequently Asked Questions About Partner Disputes in Chile

Can a partner exit an SpA if the others refuse to buy them out? It depends on what the bylaws provide. In an SpA, shares are in principle freely transferable, unless the bylaws establish restrictions. If there is no statutory right of first refusal, the partner may transfer their shares to a third party without requiring the others' consent. If restrictions exist and the other partners neither exercise the right of first refusal nor consent to the transfer, the options available to the departing partner depend on the specific circumstances and may include nullity claims, liability actions, or, in extreme situations, dissolution of the company.

What happens if the company is paralyzed because the partners cannot agree? It is one of the most complex situations. If the bylaws do not include deadlock-breaking mechanisms, the paralysis can persist indefinitely. In those extreme cases, there are legal options aimed at forcing a resolution — including judicial dissolution where the law permits it — but they are costly and time-consuming. Prevention through a well-drafted shareholders' agreement is always preferable.

Can a partner sue another for damages caused to the company? Yes. If the managing partner acted negligently or disloyally to the detriment of the company, the other partners may bring liability claims, either directly or through the company. In corporations, the law also establishes a presumption of director liability in certain cases — such as the approval of related-party transactions in violation of the law — which significantly facilitates these claims.

Is it possible to judicially dissolve the company if a partner objects? In closely held corporations, yes, but subject to strict conditions. Judicial dissolution is only available in cases of serious gravity — serious legal violations, fraudulent management, or similar irregularities — and can only be requested by shareholders representing at least 20% of the company's capital (art. 105, Law N°18.046). It is not an available remedy for ordinary partner disagreements.

What is the difference between the shareholders' agreement arbitrator and the bylaws arbitrator? They are not interchangeable. The shareholders' agreement arbitrator has jurisdiction over disputes arising from that contract between the parties. Matters of corporate public policy — such as dissolution — fall within the jurisdiction of the arbitrator under the articles of incorporation or bylaws. Furthermore, article 125 of Law N°18.046 requires submission to statutory arbitration — without the option of going to ordinary courts — not only for those who hold the dual role of director and shareholder, but also for shareholders whose shares exceed 5,000 UF in book or market value at the time of the claim.

In Varela Abogados we advise partners and shareholders at every stage of a corporate dispute: from the preventive review of bylaws and shareholders' agreements to representation in arbitration and litigation proceedings. Learn more about our dispute resolution practice or contact us directly for a consultation.

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The information contained in this article is for general informational purposes only. It does not constitute legal advice and is not a substitute for consultation with a lawyer regarding your specific situation. For guidance on your particular case, we invite you to contact our team directly.