In Parts 1 and 2 of our series, we discussed the common causes of shareholder disputes and the common approaches to resolving them. In this article, we discuss Equitas Consultants’ unique approach to resolving these disputes.
The scenario is that parties in business together have suddenly stopped communicating with each other effectively, if at all. What was once a business run with clear lines of authority is now a dysfunctional governance structure. What was once relative harmony between the key stakeholders of the business is now a tension-filled energy sapping relationship that is threatening to affect the business in a major way (if it has not already done so). What were once civil family relationships are now frequently hostile interactions threatening to destroy the family fabric (if they have not already done so).
In these situations, the typical result is litigation with all the attendant negative consequences that we described in Part 2. As people often say, in those situations “only the lawyers win” and unfortunately for the parties involved that tends to be a true statement in almost all cases.
The best way to describe what Equitas does in these situations is by analogy to a divorce. When the relationship between a husband and wife breaks down irretrievably, one of them typically hires a lawyer. That in turn forces the other party to hire his or her own lawyer and before you know it the allegations and accusations start flying between the lawyers and emotions quickly ramp up.
Sometimes however, spouses decide to hire an independent mediator to help them sort things out in order to avoid both the prohibitive cost and public nature of litigation not to mention all the nastiness. That is what Equitas does in the case of a“business divorce”. We act as a mediation team to bring about a resolution that is fair and just (“equitas” in Latin) at a fraction of the time and cost of litigation.
We do this first typically through the use of a psychologist to see if there is any way to patch up the differences and get things back on track. If that does not work, then we suggest that we prepare a report with the various divorce alternatives laid out – e.g. one party buying the other(s) out, putting the businesses up for sale and dividing the proceeds, or dividing the assets up in a tax-effective manner. We then work with the parties in a mediated fashion to help them make a collective decision.
Besides the psychologist, our team consists of a corporate lawyer acting as a facilitator / advisor and a certified professional accountant acting as a business valuator / advisor working in conjunction with the client’s legal, accounting and tax advisors. We remain completely objective at all times as our client is the business itself and not any of the parties involved. The parties trust that we will provide objective advice which will get them no less than what they would get if they went to litigation. All within a discreet environment and at a fraction of the cost had they gone through litigation.