Business partnerships, just like every other human relationship, go through periods of conflict or disagreement. However, allowing disagreements to fester into serious disputes is almost never in the larger interests of the business. It is best to consider time-tested options, such as mediation to resolve business partnership disputes in a swift, confidential, and amicable manner.
Dispute Resolution through Mediation
With professional help from a reputable mediator who has the knowledge and experience in handling business partnership dispute mediation, it is possible resolve all issues in an informal, closed-door setting. Business partners that have serious differences of opinion and communication gap or trust deficit can address their concerns in an affirmative environment facilitated by an objective, third-party mediator.
Experienced mediators will help all parties recognize that if their common interest is to continue to be in business together, resolving the dispute is in their own best interests. Unlike litigation, the business partnership dispute resolution through mediation does not have to be a long-drawn, adversarial, and very public process where the confidential elements of the business get exposed, business competitiveness and employee morale gets damaged, and business continuity gets threatened.
Mediation is a quick, constructive, and confidential dispute resolution process where the control over decisions remains with the parties involved, and not in the hands of a judge. A competent mediator will help the business partners identify their concerns and overcome distrust and negative communication cycles so that spotlight is turned on their best mutual business interests rather than entering into a bitter blame game where nobody wins.
If during the mediation process, it turns out that the business partners are no longer in a position to continue working together, the mediator can help them explore the possibility of one side buying out the others’ partnership interests. This could be a feasible solution where at least one partner or group is interested that the business must continue.
In some cases, it may become apparent during the mediation process that none of the business partners is inclined to continue the business. If the facts and figures show that the business itself is a potentially profitable and going concern, the mediator may encourage the business partners to consider selling out the partnership firm to new owners.
Where business partnership share is not equal, the mediator may sometimes suggest paying out a fair market value (FMV) to the minority partners for their interest and removing them from ownership (known as a “freeze out”). A merger can then be conducted with a newly constituted firm owned by the majority partners.
If it emerges during the partnership dispute mediation that salvaging the relationships and business is not a feasible proposition, the mediator may help all the partners to consider voluntary dissolution of the company. Unlike judicial dissolution, the control over the partnership dissolution process will remain with the parties in a voluntary dissolution.
Sometimes the root cause of business partnership disputes may be the company’s dire financial condition. If the mediator recognizes that the business is insolvent because the partnership’s debts far exceed the assets, they may encourage the partners to explore the option of filing for bankruptcy. Depending on the situation, they could file for full liquidation or debt restructuring bankruptcy, which allows the business to continue.
Originally published by IMI, here https://www.imimediation.org/2019/09/10/reintroducing-mediation-to-millennial-india-part-ii/Jonathan’s previous article set out solutions to awaken interest and the widespread application of mediation as a dispute resolution mechanism in India, focusing on restructuring...By Jonathan Rodrigues