Director & shareholder dispute mediation - 9 easy steps to make it a success

Mediation reconciles directors and shareholders in over 80% of cases with proper preparation

Business mediation has an average success rate of 80% . This high success rate has many causes, with preparation being a critical element. Here are 9 of the most important elements of a successful outcome to a mediation between directors, shareholders, partners and managers.

  1. Preparation:The mediator will encourage both parties to prepare as if it was a trial. Parties should gather and organise as much supporting evidence as possible, and have a good command of it. It is in the best interests of a successful outcome that both parties have to hand on the day everything they have. That way, the full picture can emerge, with each party negotiating from a position of strength, and a comprehensive settlement can be reached. If a party has not prepared thoroughly, they may find themselves unable to reach an agreement, or they may find themselves outgunned and outmanoeuvred by the other side.
  2. Full and Frank exchange: The success of a director and shareholder mediation depends on both sides having an opportunity to fully evaluate the other side. This gives both parties a view as to their prospects in litigation, as well as the strength and weakness of their case. Occasionally one party will refuse to provide copies of their position papers to the other side. This refusal sends precisely the wrong message. It indicates a desire to withhold information or to rely upon the element of surprise. It also raises suspicion that there may be flaws in your case that you are trying to hide. Participants in mediation must be willing to engage in a good faith exchange of information.
  3. Patience: Mediation generally takes a lot of time. The director and shareholder dispute may have been rumbling on for several years, and so it is unrealistic to expect that it will be resolved in a mediation of 2 hours. The mediation will take on many twists and turns, and at times may appear to be going nowhere, but patience and perseverance almost always pay off in the end. It can happen that a mediation will not be successful on the day, but will settle in the weeks after as a result of the mediation. It is also important not to rush a mediation so that there is no ‘buyer’s remorse’ later. If parties have been deeply entrenched for a significant period of time, they will need adequate time to reflect on a settlement. If the mediation is rushed, it is likely that one of the parties will walk away, or feel that they have been forced in to an agreement that they never really wanted.
  4. Compromise: No party should come to a mediation until they have a clearly accepted that they will have to compromise on something. Without a willingness on both sides to compromise, no outcome can be achieved.
  5. Early Mediation: Mediation is often most successful if it is undertaken before the dispute has become too deeply entrenched, especially if it involves directors, shareholders, partners or management. Early mediation can be an opportunity for a plaintiff to reconsider an ill-advised court case. Or if it is a “thin case” the plaintiff may want to settle before a lot of time and expense has been put into it.
  6. Choosing Mediator: The success or failure of a mediation often depends on who the mediator is. Before retaining a mediator you should find out as much as you can about his or her qualifications and methods. Then evaluate the mediator in light of the relevant factors to see if he or she is right for your case.
  7. Remember Your Objective: The goal of mediation is to end the dispute. Expressing outrage at the opposition, name-calling or accusing people of lying is counter-productive. It will move the parties even further from an agreement than they already are. Mediation is intended to be a “time-out” from the litigation and should be treated as such.
  8. Direct Dialogue: The joint session may be the first time that both parties have been together in the same place. If there were any previous meetings, they will likely have been in an adversarial context. The joint session in mediation provides a unique opportunity for parties to open up, be candid, and deliver their message to everyone in the room. The joint session also provides important opportunities to a lawyer supporting their client in mediation. You can state your position directly to the principals on the other side. Prior to the mediation all communications will have gone through opposing counsel, but hearing directly from you may be far more persuasive. Another reason to face the other side directly is as follows: Parties are generally quite sure that they understand what the facts are. But facts are almost always in dispute. Everyone needs to have a clear picture of what these disputes are about. This part of the process works effectively only when all the participants are sitting around the table. Having the mediator shuttle back and forth between caucuses to explain differing versions of the facts is inefficient and wasteful of time.
  9. Setting the Tone: Sitting down at the table can be an occasion to express your willingness to compromise and even to show some empathy for the opposing party. Agreements are much easier to reach when the other side can see that you are approaching the mediation with the right attitude, that you have heard what they have to say, and that you are willing to take their point of view into account.