Advice: Ploughing on after farming disputes

Partnership agreement

It is highly recommended that either shareholder or partnership agreements are put in place to govern the relationship between the individuals involved in the running of a farming business.

These are of considerable help as their terms can be enforced through the courts like any other contract.

However, if there is no documentation, the parties are left in the hands of the law more generally.

Consequences

When a director is engaged in activities that are in breach of their obligations and duties to the company or the other people concerned with it, action can be taken against them.

All partners and directors can be prevented from taking certain actions by court injunctions, which can be obtained urgently in certain circumstances.

These are orders that require them to desist from acting in a particular way until the final case is heard or as part of a final outcome regulating future behaviour.

Financial loss

If financial loss is suffered as a result of the activities of a rogue director or partner, a combination of statute and common law will allow victims of their actions to seek damages against them.

Where money has gone missing or been misapplied, the court will allow a victim of such actions to trace the missing funds into whichever new assets have been acquired with the money.

Board deadlock

Another consequence of a dispute, and sometimes the cause of that disagreement, is board deadlock, which can paralyse a business. If decision-making is not possible, the business will be unable to operate.

In the absence of appropriate documentation governing the relationships, the courts can assist.

Sometimes, the solution will be to order one party to buy the other out but ultimately, if rarely, the court can order that company be wound up or a partnership be dissolved.

The courts recognise the need to balance entrepreneurial freedom with oversight but, where necessary, and especially where there has been wrongdoing, they will not hesitate to get involved.

Resolving disputes: Top tips

Disputes can be hostile and engulfing and, if they are not properly managed, can develop into significant problems, such as a company’s demise.

However, even if the issue does not lead to the worst possible outcome, it still diverts attention away from day-to-day operations and tests relationships and an organisation’s core strength.

The key is knowing how to handle a dispute, which is partly about stopping it from escalating by resolving the problem at the earliest possible stage, negotiating deals and mediating arguments. Court action should be a last resort.

1) Prepare at the beginning

• While it might not be something you want to consider at the outset of a relationship, give some thought as to how disputes will be resolved.
• Ensure you set up the company or partnership properly in the first place and review it regularly to make sure it is working as intended as the business changes and grows.

2) Ensure company’s ’Articles of Association’ deed work for your business and keep them updated

• Do not just download documents from the internet. Make sure they are suitable for how you want your partnership and/or company to work.

3) Do not ignore the problem

• If a problem becomes intractable, do not ignore it and let it fester – it will only get worse. Consider appointing a mediator to help resolve the dispute quickly.