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Resolving internal business disputes… applying pressure to the wound

It is common for a business to run into difficulties from time to time, with third parties such as suppliers, customers, landlords or agents.

Prompt legal advice and assistance can help ensure that the dispute is addressed correctly in the first place, carefully following paths which will lead towards the best possible outcome, rather than keeping on digging a deeper hole.

If they become protracted, costly, or involve fundamental aspects of trading, even winnable court cases can have an adverse effect upon a healthy business.

It is therefore important to consider not only the legal rights and wrongs of a situation, but also the commercial impact of the courses of action available.

It is even more important to handle a dispute carefully, when it arises between elements within the business itself. Business owners have to be very aware of the impact of the latest employment relations legislation when dealing with their workers. A dispute within the workforce needs careful handling.

Disputes between partners or shareholders are surprisingly common. Frequently, the disputes team at Wards is asked to advise businesses, directors or shareholders on their rights in given situations.

Common examples are where two partners or directors have established a business, traded it successfully for a number of years and then something happens. Whether there is a change in the personal circumstances of one of them, a disagreement over planning for the future of the business, or it's simply the case that the "thrill has gone" for one and not the other, disagreements at this highest level threaten the very nature of the viability of the business as an ongoing concern.

Sometimes there needs to be a parting of the ways, sometimes a basic change in the management of the business will restore harmony. Whatever, it is usually a mistake to hope that things will get better without pressure being applied to the wound, stemming the loss of the business' lifeblood, and carrying out surgical intervention to save the business from premature demise.

The court procedures in such matters are governed by the Companies Act and the Partnership Act. If the business is equipped with a shareholders' agreement or deed of partnership then there is often a route-map for instances such as these within that. Sometimes, the route map may not suit the purposes of one or all of the parties.

For all of these reasons, mediation should be considered, as a matter of routine, when dealing with internal business disputes. After each party has taken legal advice, and frequently with the assistance of the business' accountants, or independent accountants, the parties agree to appoint an independent mediator to help them find a solution, and attend a without-prejudice, confidential session. Setting out their position in a clear and logical fashion, there is usually an initial "round table" meeting which allows each party the opportunity to hammer home vital concerns in the shortest possible time. The parties generally then retire to separate rooms, and the mediator sees each party in turn. The mediator does not reveal what he is told in the private sessions without permission, and thus gains a view into the aims and objectives of both sides. Offers can be made in confidence, the mediator can suggest where a settlement might lie, but cannot impose a settlement in any way.

Over 85% of disputes referred to mediation settle on the day or within a few weeks, thanks to the accelerated attention paid during the day, and the insights gained into the objectives of each party. A solution is found by the parties themselves, without handing the dispute over to a Judge or arbitrator. The matter is often resolved in 8 hours rather than 18 months.

It is quite possible to carry out mediation on the telephone or by video link. The parties do not have to meet at all.

Sometimes, it is appropriate to have an initial skirmish in Court, or to await certain stages in the Court's procedures before proposing mediation. With internal business disputes, however, swift intervention is often more effective in saving the business serious loss.

Wards' disputes team routinely consider mediation for their cases and have successfully mediated a good number of them. With an accredited mediator on the team, we have an insight into the best ways to bring a case to mediation, maximising the chances of a satisfactory outcome in that forum as well as at Court.