We are regularly engaged to assist directors and shareholders who are engaged in disputes, often where there is a 50/50 deadlock, as the interests in the business are equally owned (whether as shareholders or beneficiaries of a trust).
Often the parties in question are related or are long-term friends, which makes the dispute more complicated as emotions run deep. It is not uncommon for these disputes to resemble a 'family law' type dispute between two partners. Indeed, the emotions and accusations that are often made are in many respects very similar to a family law separation.
Because of the historical relationships involved, there is a natural tendency of the parties to exhaust much time and energy trying to resolve the dispute themselves instead of calling in independent professionals. Whilst there is nothing wrong with this approach, parties often get caught up in the emotional aspects of the dispute, neglecting the underlying business and its assets which can be seriously impacted during this time.
Much time is often wasted (in some cases, over a year or more), and when either party eventually engages a lawyer, opportunities to resolve the matter on a more favourable commercial outcome are sometimes lost. This includes properties being mortgaged and assets otherwise being depleted or transferred to entities beyond the reach of the aggrieved party.
Where the dispute involves serious allegations of impropriety, fraud, breaches of directors' duties or oppressive conduct, acting sooner rather than later could make a significant difference to the ultimate outcome for the innocent parties seeking a quick financial resolution. Strategic opportunities to protect the business and assets or pursue a recovery may be lost because of the delay; assets may have been transferred to another jurisdiction (such as overseas) making them more difficult or even impossible to recover, and solutions such as injunctive relief to freeze assets and possibly appoint a receiver, manager or provisional liquidator may also become more challenging.
We are seeing this more and more where the parties in question do not speak English and sometimes believe that it is better to try and resolve the dispute using cultural mechanisms rather than engaging lawyers. By the time that these clients come to see us, they are often upset that they can no longer pursue a speedy recovery (or at all) and don't understand that under the Australian legal system, taking pro-active steps sooner than later is often critical.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.
