If you were to Google ‘what is management dispute?’ the search result verbatim would be:
“Management Dispute means any matter which, after having been duly presented for approval of the Partners, is not approved by a Required Interest, but which receives the affirmative vote of a Majority Interest.”
To some extent, I defer to the above explanation. It would be incorrect to treat mere difference in opinions or arguments as management dispute. That in fact is the part and parcel of decision making process. I believe that ‘management dispute’ could be best explained as a cold war situation. It could also synonymously be referred to as a ‘management deadlock’ situation which is inflated to an extent beyond mutual resolution. It could either be backed by a series of events that have resulted in interrupting the operations of the organization, or could be a single event jolting the operations.
In a couple of months I would be completing half a decade in this profession and in my modest experience so far, I could say that these disputes could be put in the following two broad categories:
I) Issues driven by personal vengeance /ego clashes
II) Fraudulent practices/malpractices resulting in breach of trust
The manner of tackling each of these categories would be different. Further, it is not that the disputes arise only when the management team has outsiders (not relatives). I have handled disputes between close knit teams and trust me when I say this, that they are the tough ones to crack because the personal differences have an impending bearing upon business matters and they become interdependent.
Now a natural instinct that may trigger here, is to ensure that the initial business arrangement should be drafted in a manner so as to secure any prospective deadlock. Though this cannot be ruled out completely, however certain measures, like the ones stated below can definitely be taken care of in order to keep deadlock situations at bay:
1) Control in terms of management and / or voting power should not be equally divided
2) There must be a clear definition of powers and responsibilities with minimum or zero overlap and a defined transparent process for its execution.
3) There should not be any concentration of powers w.r.t. business operations, although some leverage may be given to ensure smooth operations.
The above in spite of being vanilla in nature, are the biggest game changers when the dispute arises. However these measures may not be definitive to grant immunity, as each business arrangement is unique. Thus the effectiveness and the extent to which these could be implemented as a shield, could vary. Once it has been identified that the management has been divided owing to a dispute, its resolution becomes apparent. The following is a basic guide in this regards:
1) Recap:
Understanding all the facts in a correct manner is the first step in handling such cases. Hit restart and with a fresh mindset, list down all the events in chronology. The chronology of events is as important as the events themselves. Make notes, gather necessary documents and steer clear of developing any prejudices or framing opinions at this stage.
2) Stay Neutral:
Any preset prejudices would only defeat the resolution process. Thus, before any actions are taken, it is always advised to stay neutral and revisit all the events at a macro level. This facilitates better understanding of the trigger points of any dispute and the effective measures for its resolution.
3) Forensic Audit:
The incidences narrated should be corroborated by relevant documents. Apart from this, it is equally important to study the entire case again, this time based on the documents - financial and otherwise. The understanding as derived in point 1 should somewhere be a close match to the findings of the forensic audit. Should this not be achieved, the genuineness of the case could become a concern. This groundwork should be indispensable.
4) Designing tactics:
Before setting out any strategy, it is crucial to identify the desired goal. Further, the legal provisions should also be studied meticulously. A comprehensive course of action is then advised to be chalked out, anticipating the reflexes of the opposite party. There should be a thorough analysis of all the possible outcomes of your action plan so as to check if the same is in line with the desired goals. A back up plan should also be prepared at this stage focusing the ‘worst case scenarios’.
5) Act
In case of dispute resolution cases, it can often be seen that the action plan so devised cannot be implemented in the exact manner. Certain deviations or improvisations become necessary due to the manner in which events unfold. However, there must be a conscious effort to regulate the actions so as to certify that the adopted course is not in contradiction to the desired goals.
Whether you are a party to the dispute or a consultant, the biggest challenge in dispute resolution is to avoid being biased and jumping to conclusions. Management Dispute resolution is more focused on driving the energy towards resolving the dispute rather than passing a judgement as to what is ‘right and wrong’.
Ravina Shah | Partner | RBKRS & Associates LLP
