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What role does Alternative Dispute Resolution play in a partnership split?
  • 30th Mar 2022
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At some point in your professional life, you may choose to enter a partnership agreement to formalise an alliance with a business partner. A partnership agreement will contain terms and conditions that all parties must legally comply with, and it will detail the expectations of an outgoing partner in the event of a partnership split.

Professional partnerships can often reach an inevitable end as career ambitions change and partners develop new interests. To protect the financial position of all stakeholders involved and secure a stable future for the business, the narrative of a partnership agreement will always align with the best interests of the company.

Often in life, relationships can reach a tipping point when even basic forms of communication may prove to be a challenge.  Alternative Dispute Resolution (ADR) can build a channel of communication between the parties in dispute and sow the seeds to a fruitful outcome.

What is Alternative Dispute Resolution?

Alternative Dispute Resolution is a way to resolve a dispute between parties through the introduction of a neutral third party. It is an alternative route to the court process and can provide individuals in dispute with the chance to resolve an ongoing issue.

Alternative Dispute Resolution is cheaper and consumes less time than court proceedings as the process involves fewer intermediaries. It is a confidential route that can result in a settlement between both parties, for which some can hold legal weight. As ADR is facilitated by an external service provider and both partners enter it voluntarily, it is flexible and can be tailored around the needs of both parties and their schedules.

What Alternative Dispute Resolution procedures are available?

Alternative Dispute Resolution is available in many forms and can be used to resolve a dispute between business partners, such as:

  • Mediation – An independent and neutral third party will create a communication pathway through which both parties can communicate to reach a successful outcome. The mediation process is managed by both parties. Although mediation is not legally binding, the solution can be legally binding if a resolution is signed.
  • Arbitration - An independent third party will assess the situation based on the facts provided and make a decision that may be legally binding  

Some ADR schemes are also known as ombudsman services that are often individual to a particular sector or industry.

How can ADR support a partnership split?

A partnership split can either end on good terms, or bad terms. If the alliance ends under hostile terms, ADR can help both parties reengage in communication and reach an agreement. All conversations will pass through a middle person to protect decision making essential to the peace process.

ADR can help parties in dispute draw a line under a divide and continue forward. Without this form of assistance, company directors may choose to voluntarily close the solvent business and part ways.  

The introduction of an external individual that is neutral to the process can help erase bias and preconceptions that could otherwise skew the decision-making process.

Business partners may choose to split from a partnership for a number of reasons, from moving on to new ventures, a conflict of interest or selling shares to raise money. ADR can help provide a safe and confidential platform through which all parties can engage in productive discussion.