Quick, affordable, flexible: how to resolve business disputes via the Companies Tribunal

One of the tribunal’s main functions is to serve as an alternative dispute resolution forum

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One of the most difficult situations a business owner or shareholder can face in these tough economic times is a company dispute.

When a company is involved in a court case, its productivity can be disrupted significantly. In addition, there is the anxiety associated with the thought of court litigation and financial and reputational risks.

It also means managers will spend substantial amounts of time dealing with lawyers, the media and other litigation-related issues. The cost of productive time lost in this way is largely hidden, but it takes management’s attention away from core business issues.

Businesses need quick, efficient, affordable and predictable ways to deal with such situations. In 2006, a study in the UK revealed that conflict in British business cost about £33bn (R596bn) a year. The costs associated with commercial disputes also go beyond litigation, as the process can involve time and resources invested over many years.   

In South Africa, the Companies Tribunal is an independent entity of the Department of Trade and Industry. It plays a crucial role in reducing compliance regulatory costs by providing a speedy and effective dispute-resolution mechanism.

In 2006, a study in the UK revealed that conflict in British business cost about £33bn a year

One of the main functions of the tribunal is to serve as an alternative dispute resolution (ADR) forum for disputes arising out of the Companies Act No 71 of 2008.

ADR is a simple process of resolving disputes through mediation, conciliation and arbitration – similar to the way the Commission for Conciliation, Mediation and Arbitration operates. Tribunal members are trained in ADR and have experience and qualifications in commerce, economics, law, industry or public affairs. Some of these members act as high court judges and two are professors of law.

The Companies Act gives the tribunal unlimited jurisdiction when it comes to ADR, as long as disputes fall within the scope of the Act. For instance, ADR matters handled during the 2017–18 financial year included directorship disputes, shareholding disputes, payments of dividends, and access to financial statements.

It should be noted that South Africa is still behind compared with other jurisdictions when it comes to commercial mediation. This could be due to the fact that South Africa is generally a litigious society, or due to lack of confidence in ADR.

There are four ways in which the tribunal’s ADR makes good business sense:   

1. Cost effective and speedy

According to tribunal chairperson Mohamed Alli Chicktay, “on average it takes about 240 court days for civil cases to reach a conclusion. In a fast-moving business world, this is too long and, inevitably, expensive.” Depending on the complexity of the matter, the tribunal’s ADR process is completed within a day or two – and it’s free of charge.

2. Flexible

ADR is scheduled at the parties’ convenience, unlike litigation in court where parties must wait for a court date. The convenience allows parties to focus on their core business and remain productive. The tribunal conducts ADR hearings where parties reside and it is not compulsory for any party to be represented by a lawyer. The informal nature of the proceedings is intended to make justice accessible to South Africans.

3. Preserves business relations

Parties have a bigger say in the ADR outcome, unlike in a “winner takes all” litigation process. The role of the tribunal member is to help parties in dispute find a mutually beneficial solution. He or she cannot impose the terms of the settlement agreement. The conciliatory nature of the proceedings helps parties preserve relationships between suppliers and customers or between directors and shareholders, for example.

4. Confidential

All discussions and disclosures made during ADR are confidential and inadmissible as evidence in any court or other forum, unless they are recorded in a consent order signed by parties and the tribunal member and made an order of the court.

No party may be compelled to make any disclosure of information. Confidentiality is critical for a company, and court litigation is open to the public, which could tarnish the company’s brand.

To lodge an application for ADR, applicants must complete form CTR 132.1 and file it with the tribunal. The form must be accompanied by a statement of claim and supporting documents. The statement of claim should state how the dispute arose; the conduct that is the subject of the dispute; actions, facts and circumstances; and any other particulars of the request.

Applicants must indicate whether they wish to apply for mediation and/or conciliation or arbitration. In case of arbitration – which is a little different from mediation and conciliation, as it is akin to a formal court process – the statement of claim must be in a form of an affidavit.

Participation in the Companies Tribunal’s ADR proceedings is voluntary. Any party can at any time withdraw from the proceedings without furnishing a reason for withdrawal.

Companies are encouraged to use the services of the Companies Tribunal as an alternative to seeking relief in court, and to include in commercial contracts the use of ADR services as an alternative to court proceedings.

Including an ADR clause in a commercial contract makes it easier to secure agreement on a dispute resolution mechanism when relationships are still intact. When a dispute arises, relationships may become strained.

Anyone interested in filing an application for ADR with the tribunal must file such an application with the registrar on registry@companiestribunal.org.za. For more information, visit www.companiestribunal.org.za.  

This article was paid for by the Companies Tribunal.