Anyone who’s been in business for a while will tell you that disputes happen often. Whether it’s a breach of contract, a misunderstanding or a disagreement – there are plenty of reasons that can drag even the largest of companies into litigation, or worse, force them to shut their doors for good.
If your business is involved in a dispute, or you’re an individual involved in a dispute, make sure you have proper representation. Disputes can be costly, not just economically, but also in terms of your time and business reputation.
Business solicitors can be found at many law firms in Perth and can assist you in defending your interests. With that, let’s get into the most common disputes and look at some ways of dealing with them.
1. Breach of contract
A breach of contract is by far the most common ground for a dispute. Most likely, other categories of dispute will often involve some form of breach of contract, as it involves a party to the agreement failing to uphold their end of the bargain. Sometimes, the contract allows for discretion, leaves the door open to interpretation, or simply does not account for the likely contingencies. Often these situations empower different parties to interpret what is in the contract in the way most agreeable to their end goal.
Depending on the severity of the breach and the economic fallout caused, you may prefer to ameliorate the situation either jointly or via a third-party mediator. Ultimately you might consider engaging legal counsel if you cannot resolve the issue by other means for example by ending the contract or dissolving the agreement. The most important thing to remember is to ensure your legal footing and protect your assets.
2. Disputes involving business partnerships
With over 2.4 million active businesses across Australia, partnerships account for a good many of that total. 236,114 to be precise. Just like any long-term relationship, there are ups and downs – some of which can prove more stressful than others. In business, relationships matter just as much – and the effects of a disagreement or misunderstanding can prove critical to whether the business will survive.
Most often, however, business partners disagree on the plans or direction of a business. This can cause disputes over where the company should go, or even cause tension further down the ranks.
What’s the solution?
Have a clear plan that both partners agree on from the beginning, and document it properly. When big picture plans don’t enjoy the full support of the two main stakeholders, things can get messy. Be honest and transparent with your business partner and have regular discussions about issues facing the partnership. This builds trust and keeps you on track when it comes to deciding the future of the business.
3. Disputes over non-compete agreements
These days, with more diversified and contract work up for grabs, companies will often ask employees or contractors to sign non-compete agreements that bar them from performing similar duties for a given period of time (like the length of a contract) and in a given geographical zone – for example Western Australia. These types of clauses are very often incorporated into employment agreements.
As the workforce becomes more fluid, and as freelancing takes over, companies are often finding that employees and contractors are working two, three or even more jobs simultaneously – which distracts and reduces performance overall. Disputes can arise as to whether this took place, and whether the activities performed constitute a breach of that agreement or not.
Be clear with employees and contractors about the expectation from the beginning, and don’t sign them on if you think they will risk breaching a non-compete agreement down the track. Likewise, if you’re an employee or contractor, make sure you can justify other activities, or ensure you’re not taking part in any activity that might be in breach. However, you should be prepared to act if and when it does happen. Be sure to have quality legal representation backing you up.
4. Shareholder disputes
Shareholders of a company have decision-making rights about where the company goes, both strategically and otherwise. In private companies, the shareholders are often also the directors who are responsible for the day to day running of the company. A shareholder dispute can arise when high-ranking shareholders disagree on major decisions concerning the direction of the company. This can manifest in detail of decision-making capabilities, reduction of dividend payouts or the re-assignment of intellectual property rights following the departure of a major shareholder.
Small and medium enterprises are most prone to these disagreements as the long-term strategy is usually more in flux than at larger more established companies.
How to prevent shareholder disputes?
Be sure to have signed shareholders agreements that clearly outline voting rights, how payment of dividends is carried out, and importantly, how disputes will be dealt with. A solid shareholder agreement will make your business waterproof when it comes to disputes around decision-making, payment of dividends and any other issues which may arise. If in doubt, make sure to contact a qualified business dispute lawyer.