How can mediation be used to deal with disputes within and over family-run firms? This article covers some of the potential answers.

The following commentary focuses on mediation as an avenue for handling family business disputes. Many firms are family-owned and inevitably, arguments break out, families can split up, creating a range of problems. Handling such disputes is also a central issue for succession and transfer. Needless to say, lawyers have much to say about this. This article, written by Nikki Aston, associate in the family team at law firm, Shakespeare Martineau, covers some main points. The editors are pleased to share these views and invites readers to respond. The usual editorial disclaimers apply. To respond, email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com
 
Mediation is an important and useful tool when trying to resolve disputes. However, whilst this form of alternative dispute resolution is becoming an increasingly common sight in family law cases, many family businesses are unaware of the benefits that mediation can bring.

The process is often associated with couples who are dealing with their children and finances after a relationship break down, with many courts sending them to mediation to sort out their differences in a regulated environment. However, mediation can also be very beneficial in family business disputes. Although the dynamics of a couple and a family business are different, mediation can still be a suitable way to have difficult conversations in a controlled way. For example, a power imbalance and deadlock between couples and family members can be a big obstacle that prevents issues being resolved. Mediation is the perfect forum in these instances.

A voluntary form of dispute resolution, mediation gives people the opportunity to find their own solutions with the help of an impartial third-party facilitator. The mediator is there only to signpost issues and the routes available to solve them - the final decisions, and indeed resolutions, are left entirely up to the individuals involved. Those discussions, and the decisions made therein, are confidential. 

Mediation can help with most forms of family business dispute, whether it be succession planning, bringing new people into the business or diversifying. As soon as a lingering issue begins to grow and cause tension, for example, an ill member of the family not wishing to address who might take over from them, mediation should be considered.

For family businesses which want to make their own decisions, mediation allows them to do just that. They can control the amount of money spent on the sessions, the timescale over which the sessions are held and exactly who is involved. A final decision is never forced onto the business and a solution can be created on their own terms. In what can be highly emotional circumstances, this feeling of autonomy is essential. There is no fear of being pushed into an unwanted result (in contrast to litigation in court) which can create the right setting for a successful discussion.

The process is simple. Mediators speak to each party separately first, and assess if the case is suitable for mediation. If so, a joint session is arranged, the main topics for discussion are identified, and an agenda is created. Mediators use flip charts and talk through them, allowing people to clearly visualise every aspect of a potential agreement. Differing opinions can then be compared and other points of view understood more easily. Mediation will usually comprise 3-5 sessions, with a few weeks in between allowing each party to obtain further information and/or legal advice if necessary.

Should a family business be considering mediation, it is vital that they enter the process with an open mind. It is almost certain that difficult conversations will be had, but as long as everyone is honest and transparent with each other, the process should be a smooth one. Most importantly, participants must be willing to listen to the others in the group and the mediator. Unless this occurs, it is unlikely that a suitable solution will be found.

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It is essential that the mediation professional chosen is someone that the participants feel comfortable with. If they are afraid to speak out about their views in front of an external person, then the process will be futile. With a proactive approach and a knowledge of family law, understanding the issues being faced by the business and reaching a resolution is far more likely.

When people are living and working with their family members, it can be difficult to separate these elements and have balance. However, if work issues then spill over into family life this can cause lasting damage to family relationships if disputes aren’t addressed.

Mediation provides a proactive and cost-effective solution to ensure that those who feel concerned about work-related issues with family members have an alternative option to simply leaving or taking more serious action.

Enabling people to reach a compromise that suits everyone ensures family businesses can continue successfully without the breakdown of important bonds.