Family businesses
Mediation in a family business
Making a decision in a family business can inherently lead to a conflict between family members, such conflict can cause irreversible damage to the family business, and a serious crisis in the family.
Resolving disputes and conflicts through mediation enables and contributes to the founder of the business, as well as family members, to resolve the dispute between them.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
Mediation in a family business
It is natural and known that in a family business the emotions run very high, which can have a significant effect on the decision-making process of family members.
When family members work together, the possibility of friction between the parties is even greater and there is a danger not only of harm to the business but to the family dynamic as well. The mediation process is an effective tool for resolving disputes and its benefits, particularly in disputes in family businesses, cannot be understated. Therefore, it is recommended to adopt mediation as a mechanism for resolving disputes in the family business, for this purpose it would be beneficial to determine this within the framework of a family agreement.
Common Types of Conflicts in Running a Family Business?
Introducing a family member and / or spouse of a family member into the family company
Disagreements between sibling partners who bring their children into the family society
Reward of a family member entering the family company
Compensation of family members who are not employed by the family company
Intergenerational transmission of the family company, including how to pass the baton of management from generation to generation
Advantages of a mediation procedure for family businesses looking to resolve disputes
Mediation as a tool for resolving disputes has many benefits, through which it is possible to reach a dispute resolution in a short time, save financial costs, maintain a healthy dialogue between the parties to the dispute and even prevent future conflict.
time
Time is a central factor when a material dispute arises in a business, as in many cases there a conflict may lead to a stoopage delay the business activity, in whole or in part. As long as the parties choose to go to court, they will probably have to wait a long time (months and even years). this can lead to significant financial losses for the business. Not to mention that as the conflict lengthens and is not resolved, there is a danger that it will affect the family relationship, as well as spread to the rest of the family who are often required to take sides in the conflict.
Business efficiency and cost savings
The mediation procedure is much more effective than having a legal proceeding in the courts, this advantage is manifested in several ways. First, by avoiding the downtime or delay of business activity while formulating a solution to a dispute within a short time. Second, mediation is much less costly than litigation in court, which is time-consuming and involves fees, attorneys’ fees, accountants, expert opinions, loss of work time (to prepare for court hearings), and so on. Third, as will be detailed, mediation has the ability not only to resolve the point of dispute that has arisen between the parties but also to contribute to the future of the personal and business conduct, of the family members in particular, and the business in general.
Maintaining a healthy and respectful dialogue between family members
When it comes to a family business, there is a very high urgency to resolve a conflict that has arisen between family members. It is not just a business interest in resolving the dispute in order to continue to operate the “machine” and prevent economic losses. In this issue we are dealing with family members who have a first-rate interest in maintaining a healthy dialogue between them, not only for the sake of their relationship but so as not to harm the entire family fabric. As its name implies, the mediation procedure comes to mediate between the parties, looking for the common denominator alongside the dispute. By conducting a focused dialogue, the anger gradually subsides and the parties learn to communicate with each other in a healthier and more respectful way until agreements are reached. Such a result is very difficult to achieve when conducting a dispute in court, so the natural tendency is to escalate the situation between the parties, and it can be said, in many cases any judgment given in a legal dispute constitutes a Pyrrhic victory.
Prevention of future conflict
A good mediator can offer creative solutions which the parties have not yet thought of (or otherwise have thought of and due to tactical considerations they preferred not to raise). Had the issue reached the courts, they may not raise the same solutions. For this reason, mediation may help in preventing future conflicts in a way the courts do not, but how? In mediation sessions, the mediator characterizes and refines the type of dispute between the parties and gets to the root of the conflict. The mediator allows the parties to make their claims honestly and freely, a fact that leads to honest and open discourse. The family members then use the tools the mediation lays out, allowing a return to the daily familial routine and business practices of the family.
