SAVE BUSINESS COSTS THROUGH ADR
Four ways in which Companies Tribunal’s ADR makes good business sense
The most difficult situation any business owner or shareholder does not want to face in these tough economic times is company disputes. In addition there is anxiety associated with the thought of court litigation, financial and reputational risks associated with such litigation. When a company is involved in a court case, one of the most significant costs is the disruption to its productivity. It also means managers will spend substantial time dealing with lawyers, media and other litigation-related issues.
This opportunity cost of time is largely hidden and takes management’s attention away from core business issues. Business needs quick, efficient, affordable and predictable outcomes from litigation. In 2006 a study in the United Kingdom (UK) revealed that conflict in British business cost some £33 billion a year. Costs associated with commercial disputes goes beyond litigation as it involves time and resources invested over many years in the dispute.
The Companies Tribunal (the Tribunal) which is an independent entity of the Department of Trade and Industry, plays a crucial role in reducing compliance regulatory costs by providing speedy and effective dispute resolution mechanism. One of the main function 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 (the Act).
ADR is a simple process of resolving disputes through mediation, conciliation and arbitration which is almost similar the Commission for Conciliation Mediation and Arbitration (CCMA). It is conducted by Tribunal members who are trained in ADR, and have suitable experience and qualifications in Commerce, Economics, Law, Industry or Public Affairs. Some of these members act as Judges of the High Court, and there are two Law Professors.
The Act empowers the Tribunal to have unlimited jurisdiction when it comes to ADR as long as disputes fall within the scope of the Companies Act. For instance, ADR matters handled during the 2017/18 financial year included the directorship disputes, shareholding disputes, payment of dividends and access to financial statements. It should be noted that South Africa is still behind compared to other jurisdictions when it comes to commercial mediation. This lag could be due to the fact that South Africa is generally a litigious society or lack of confidence towards ADR.
There are four ways in which Companies Tribunal’s ADR makes good business sense which companies may not be aware of:
- Cost effective and speedy
According Tribunal’s Chairperson Dr MA 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, inevitable, 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.
ADR is scheduled at the parties’ convenience unlike a court litigation where parties must wait for a court date. The convenience allows parties to focus on their core business which is productivity. The Tribunal conducts ADR hearings where parties reside and it is not compulsory for any party to be represented by a lawyer. This informal nature of proceeding is intended to make justice easily and accessible to South Africans.
- Preserves business relations
Parties have a bigger say in the ADR outcome unlike a ‘winner takes all’ litigation process. The role of the Tribunal member is to help parties in dispute to find a mutually beneficial solution. He or she cannot impose the terms of the settlement agreement. The conciliatory nature of the proceedings helps parties to preserve relationships which may be critical between suppliers and customers or directors and shareholders.
All discussions and disclosures made during mediation or conciliation are confidential and inadmissible as evidence in any court or other forum; unless the discussions and disclosures are recorded in a consent order signed by parties and the Tribunal member and made an order of court. No party may be compelled to make any disclosure of information. Confidentiality is very critical for a company unlike the court litigation process which opens proceedings up to the public, which could tarnish the company’s brand.
In order to lodge an application for ADR, the applicant must complete form CTR 132.1 and file it with the Tribunal. Such a form must be accompanied by a statement of claim and supporting documents. The statement of claim should state how the dispute arose, the conduct, which is the subject of dispute, actions or facts, circumstances and the particulars of the request.
The applicant must indicate whether he/ she wish to apply for Mediation and or Conciliation or Arbitration. In case of arbitration the statement of claim must be in a form of an affidavit. Arbitration is a little different from mediation and conciliation as it is akin to a formal court process.
Participation in the Companies Tribunal’s ADR proceedings is voluntary. Any party can, at any time withdraw from the proceedings without furnishing reasons for withdrawal.
Companies are encouraged to utilise the services of the Companies Tribunal as an alternative to seeking relief in court. Companies are further encouraged to include in commercial contracts the use of ADR services as an alternative to court proceedings. Including an ADR clause in commercial contract makes it easier to secure agreement on dispute resolution mechanism when relationships are still intact instead of at the time when a dispute arises when relationships may be strained.
Anyone interested in filing an application for ADR with the Tribunal must file such application with the Registrar through: Registry@companiestribunal.org.za