As an MD or FD of a business, you simply want to avoid disputes. By their very nature, they are time consuming. There is also more at risk than simply a lack of payment in most business disputes, it could be the threat of professional negligence or tainting the company’s reputations in the market place.
In any type of business dispute the issue means :
- Time away from running or developing the business;
- Increases costs, not just in terms of the business’ time, but also legal fees which is an expense all businesses want to avoid if at all possible;
- May cause additional stress
- Employees being distracted or having to spend time in dealing with questions that arise out of the dispute.
What can a business do to avoid a dispute in the first place?
- Spend time with solicitors and ensure that you have the correct documentation in place such as contracts, Non-Disclosure Agreements, Joint Venture agreements, Shareholders and Partnership Agreements, Sale and Purchase agreements for assets or businesses as a whole, manufacturing agreements and distributions agreements. I know what you will be thinking “well of course you will say that, you are a solicitor” but trust me – the better the agreement, the harder it is to say the agreement is ambiguous or have any other interpretations. An example of when agreements are badly drafted include such things as using terms i.e. ‘Confidential Information’ but not actually defining that specific term within the agreement. This could then lead to parties having different interpretations of the term at a later date, leading to confusion and worse case scenario to a dispute.
- Ensure that you have a set of agreed terms to determine what you want out of the agreement with the other party. Don’t insist that the agreement must be a simple agreement, allow your lawyer to draft the agreement in the best possible terms to suit your business needs. Any good lawyer will approach this in a commercial way.
- Ensure the documents are executed correctly – what do I mean by this? Ensure that you and that the other party(s) sign the documents in accordance with what is dictated by the agreement. In particular, some agreements simply require the person to sign, others require it to be signed as a deed. It is important that you know what you are signing and the consequences of signing the documents accordingly. In some instances, such as in construction contracts, there is not always an ability to negotiate the terms of the contract but it is always a good idea to know what you are signing up for so you know if you can actually deliver of what the contract says and not what was verbally discussed!
What happens when you are in a dispute/or when the dispute first raises it head?
- As a dispute arises it is important to act quickly.
a. Gather all documentation you have in respect of the dispute including emails. I know this is time consuming, but we often forget what has actually happened or believe a scenario that does not reflect what the emails show. It is therefore a good time to review the situation.
- Try and get the matter resolved quickly. You have two options (1) to take a conciliatory approach, (2) to argue the principal of the matter, which in some instances is just as important.
- If the dispute is not settled relatively quickly you should then look at instructing lawyers to assist in the dispute. The lawyers should consider alternative dispute resolution matters such as Mediation or a without prejudice meetings if appropriate. In some instances, however, this is only possible after a period of exchanges.
Happy days if you are able to come to an agreement with the other party as to a settlement. If you do, it is always best practice to place any settlement agreement in writing.
We would recommend that lawyers draft the agreement to ensure that it actually covers what you intend it to cover, such things as the settlement being in full and final settlement or you may want it to remain confidential for example.
No Settlement – let’s head off to Court!
If there is no settlement, then in some instances issuing court proceedings is the only way forward.
It is important to note that court proceedings take a lot of time and energy from the business and also would increase the costs significantly. However, in some matters there is simply no other way to settle a dispute and could even mean your business is changing the law which could have a profound effect on others.
In any event, a dispute often starts off as something small and then starts growing. It can take over if not controlled. If you require any further information please email firstname.lastname@example.org call 0113 302 1330 or 020 787 32279
*Please note that this is not legal advice and is not intended to be relied upon. If your business is in a dispute you should always seek legal advice for your specific business needs.