Business structures

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30 Jul 2015

Working together, when you can't work together

READ TIME

3 min

Taking out the emotion can save you $$.

We are frequently involved in resolving disputes over a range of commercial and legal issues, many of which end in litigation. Many of these disputes relate to director disputes, in fact, in 2013-14 ASIC reported that in 271 liquidations—director disputes were denoted as a cause.

What makes us different from other litigants is our perspective on dispute resolution is guided largely by commercial considerations. Therefore our decisions are based on the economics of the dispute rather than any emotive response to the subject-matter of, or other parties to, the dispute.

Recently we brought our unique perspective to facilitate the dispute resolution between two former business partners over the dissolution of their joint business interests, where they were company shareholders and directors of a medium-sized paving business that turned over $2.5 million plus annually. When we became involved in the matter, their relationship had irreparably broken down to the point that all communications between them went through their solicitors and advisors. The partners had already spent a considerable amount on legal fees and both appeared convinced that costly litigation was the only way to finalise their affairs.

Both partners approached us separately through their accountants, which specialised in SME businesses. Given their relationship with Worrells, the accountants thought it would be in their client’s best interests to get our input on how to best wind up the company structure and deal with the company assets. It started with a casual, but confidential discussion between the accountants and Worrells and in the absence of being formally retained by either partner, we gave them our independent views on the commerciality of the options available to them (without advocating for either party). This ultimately led to them agreeing to a dissolution of their business interests with a members' voluntary liquidation (i.e. winding up of a solvent company). The costs of a members’ voluntary liquidation was significantly less than the litigation, and will maximise their return from the company assets and will give a more timely end to their association.

This case is a common example of the informal assistance we can provide business partners who find themselves at odds over the ending of their business relationship. What was important in this case was that we were approached relatively early in the dispute which maximised the partner’s chances to resolve the issues between them commercially.

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