How is financial dispute resolution different?
Disputes over business financial matters often arise and require the assistance of professionals to resolve the matter. It is often appropriate to engage solicitors to assist with these matters, however the costs can sometimes outweigh the benefits or financial advisers may be required.
We assist people to resolve disputes with a commercially-minded approach. Often disputes focus closely on the issue that has arisen, but ignore other big picture factors affecting the parties such as time and financial commitments, and the impact of the dispute on the final outcome. As a result, these commitments can cause ongoing stress, a loss of focus on their business leading to decreased performance and financial costs that may outweigh the benefit of winning.
With our experience assisting people in financial difficulty and resolving financial disputes, Cactus Consulting can assist you to resolve financial disputes you may be involved in, or mediate between parties to find acceptable solutions you can agree on.
What types of disputes can financial dispute resolution help solve?
Types of engagements where we assist to resolve disputes commonly include:
- Shareholder and director disputes
- Settling legal claims and litigation
- Property ownership disputes
- Settling Liquidators’ claims for voidable transactions such as preference claims and uncommercial transactions
- PPSR disputes with Liquidators
- Family business disputes
- Marital separation or family law proceedings which impact on the structure and performance of a business
Looking at these more closely:
Shareholder and director disputes
Disputes among directors and shareholders arise for various reasons. Concerns about the financial status of the company, lack of commitment from one party, changes in personal circumstances, family and marital breakdowns or just general disagreements about the direction of the business.
The departing director will be concerned about liability for guarantees and payment of tax and superannuation accrued while a director. Often a husband may run a business, while their wife may be director, or vice versa.
Shareholders will want to be repaid their investment and share value if they are leaving, raising disputes over value and the company’s ability to pay them out.
Negotiating between parties on a commercial basis puts the emphasis of resolving a departure on commercial grounds, while providing sufficient protection for companies and individuals from potential legal action or insolvency.
Settling legal claims and litigation
Litigation can start out with the optimistic expectations, people and businesses can be forcibly dragged into it or it can be just to prove a principle. But cases that start out strong can unexpectedly become problematic, and reasonable expectations of a favourable settlement being agreed can turn to frustration. Disputes are expensive with fees to reach trial often estimated at upwards of $250,000 for each party. Lawyers, barristers, expert reports and court fees all add up. And none of this takes into account the significant emotional and time costs for the people involved, causing stress on their families and impacting their jobs or businesses they run.
For individuals and SMEs involved in litigation:
- losing a court case may mean an inability to pay, resulting in insolvency and business liquidation or personal bankruptcy
- even for a litigant expecting to win, they may not be able to afford the costs to proceed to trial, or the other (losing) party may not be able to afford to pay a successful judgement. Suddenly a winning case can become a lose:lose case.
At the point where continuing litigation may not be the preferred outcome, there’s an opportunity to look at the bigger picture and consider alternative courses of action.
Property ownership disputes
It can be necessary for multiple owners to form syndicates for property investment and development. Changes in people’s circumstances can necessitate departures from the syndicate, presenting challenges for the continuing viability of a project and exposing all parties to potential losses.
In these circumstances, innovative solutions are required to meet the financial needs and limitations of co-investors, financiers and other parties to maintain positive outcomes.
Settling Liquidators’ claims for voidable transactions such as preference claims and uncommercial transactions
When companies enter liquidation it leaves creditors, directors and other parties involved with the company at a loss. Worse still, they may receive demands from Liquidators to repay money or return assets received from the company prior to liquidation. These types of claims generally fall into unfair preferences or uncommercial transactions. While there are complex legal arguments to be proved by both the Liquidator and the creditor or other party defending the claim, there are also other factors at play in respect of the claim. Creditors that received preferences, may be struggling from bad debts sustained by the company’s liquidation. Liquidators may have limited funds to cover litigiation costs, poor evidence or other issues with their claim. Liquidators are driven by commercial outcomes that recover funds to cover their costs and provide returns to creditors.
Taking a pragmatic approach to dealing with such claims can result in better outcomes and avoid costly legal proceedings.
PPSR disputes with Liquidators
The Personal Properties Securities Act (PPSA) introduced complex issues for businesses whose assets are rented, loaned, leased, used or even just held by another business. In many of these cases, in order to retain ownership the owner of the equipment is required to lodge a PPSR registation of their interest (ie. ownership) in such goods against the company that has possession of them.
If a Liquidator is appointed to a company in possession of another party’s goods with no PPSR registration against them, the Liquidator is most likely able to treat them as company property and sell them. Common business items which ought to be subject to PPSR registrations include:
- Loans to a company secured over its assets
- Plant and equipment
- Trucks, motor vehicles and boats
- Trading stock (on retention of title terms) and items on consignment
- Crops and livestock
- Financial and intangible property (eg. shares, bank account balances and debtors)
- Intellectual property
Even when a PPSR registration is lodged, Liquidators may have grounds to dispute their validity. It’s therefore up to property owners to take steps to prove validity and enforce their security rights against Liquidators.
Family business disputes
It’s very easy for small family disagreements to become huge rifts destabilising businesses with high profile cases often hitting the media. The close personal relationships can cause commercial realities to be ignored in the pursuit of personal agendas which can leave the parties with nothing left at the end.
To avoid tearing a family and its wealth apart, pragmatic commercially beneficial and carefully considered outcomes can be negotiated.
Marital separation or family law proceedings which impact on the structure and performance of a business
When a husband and wife with joint business interests separate, things can go one of two ways. We prefer the path that involves delicate handling, careful separation of interests and unwinding of a business from a relationship to preserve its viability. The other option leaves the people involved wishing they took the this path.
We understand the complexities of marital disputes and that each party deserves their wishes to be respected. However, experience has shown that while the emotional impact will fade away, the financial impact of an antagonistic dispute may not. Family businesses can be closed and liquidated and both parties can be left bankrupt – outcomes that impact families and make no one a winner.
Need help to resolve your dispute?
To understand whether financial dispute resolution may assist your situation, get in touch with us for a free confidential discussion.