Regardless of the structure – partnership, corporation, or joint venture – every business, large or small, depends on close cooperation and a shared vision between business owners.
After starting a business together, business owners sometimes develop different visions for a thriving business. Their ideas about business strategy, management, and work ethics, go in different directions, giving rise to ownership disputes.
Types of Business Owner Disputes
Owner disputes arise for various reasons, but they all share the same trait – business owners disagree on representation, decision making, or participation. The most common conflicts between owners result from breaches of fiduciary duty, breach of contract, disagreement over direction, minority shareholder claims, and differences in compensation.
Business partners and shareholders have a fiduciary duty to the company. Disputes often arise if a shareholder sells shares contrary to the terms of the shareholder agreement or intends to terminate it despite opposition from other shareholders.
Breach of contract disputes most frequently result from different interpretations of agreements between partners or shareholders. Sometimes the agreement is incomplete, failing to define all essential aspects of doing business together.
Often, business owners disagree over direction and strategy, failing to find common language regarding business operations, capital deployment, employee issues, and other aspects of the business. That results in owner disputes.
When minority shareholders feel management does not run business with their best interests in mind or disagree over dividend payments, they raise claims, resulting in owner disputes.
Finally, conflicts between owners occur when partners and shareholders think their compensation does not equal the level of their experience and contribution to the business.
Resolving Business Owner Disputes
Filing a lawsuit and starting litigation is a traditional way of resolving conflict between owners. At the same time, it is the most expensive and time-consuming way of dealing with owner disputes. In addition, litigation disrupts business relationships and compromises ongoing operations.
The publicity of litigation means competitors can gain access to sensitive business information and use it to their advantage.
An alternative dispute resolution helps owners save business relationships, avoiding the loss of time, money, and business opportunities.
Owner Disputes Mediation
Mediation is an out-of-court dispute resolution method with numerous advantages over traditional litigation.
Mediating business disputes saves time and resources that owners can better use to advance their business. Resolving conflicts in a neutral, voluntary, and confidential atmosphere is the best guarantee that your business will overcome temporary disruptions and continue thriving.
The mediation process consists of four stages: introduction, opening statements, and private and joint sessions. After introducing themselves, mediators explain the procedure to the parties and allow them to give their opening remarks regarding the dispute. The parties then go to separate rooms for private sessions with the mediator. The mediator goes back and forth between the session rooms, talking with the parties and evaluating their arguments. In joint sessions, parties discuss the disputed matter openly, bringing offers and counter offers.
The mediator (a retired judge or an attorney) remains neutral, facilitating negotiations between the parties without proposing solutions or giving legal advice. Unlike judges, mediators do not have the authority to resolve the dispute by issuing a binding decision. They use their communication and negotiation skills to create an atmosphere of trust and enable the free flow of information. The parties are more likely to settle their differences in a friendly and non-contentious environment.
Mediation is confidential, meaning everything shared during sessions remains out of the public eye. That is particularly important in owner disputes because keeping business secrets away from the competition is crucial. Confidentiality extends to future litigation if mediation ends unsuccessfully.
The costs of mediation are incomparably lower than litigation. Without discovery, deposition, and witness examination, mediation is free from expensive attorneys and court filing fees. Without the strict rules of litigation, mediation is a time-saving dispute resolution method.
If negotiations are successful, owners sign a settlement – an enforceable and binding agreement.
A Business Mediator That You Can Trust
A certified Florida mediator, Hal Wotitzky has years of valuable experience under his belt. He knows the nuances of business disputes and can quickly identify the causes of owner disputes and help parties settle their differences in a neutral and non-adversarial environment.
Please call us today to schedule your appointment.