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How Insolvency Practitioners can assist in mediation

When two or more parties can’t agree on how to resolve a dispute, an independent and impartial mediator may be brought in to negotiate a fair settlement that is agreeable to all parties. But why choose an insolvency practitioner as your mediator?

Insolvency practitioners (IPs) are highly accustomed to working with financially distressed businesses, and individuals, who are struggling to satisfy competing stakeholder interests. As such, IPs are experts at finding and implementing solutions that represent the best form of compromise for everyone concerned.

In our experience, these solutions rarely meet the exact needs of all competing parties. Instead, they represent the best possible outcome in the circumstances, with all parties reluctantly conceding ground in some areas in order to gain ground in others. The result is a settlement that all parties can accept as fair and reasonable.

IPs are especially well-placed to assist in mediation in cases where failure to agree on a settlement would result in insolvency for one or more of the parties in dispute. By outlining the implications of failure to reach a settlement and facilitating a practical dialogue between the disputing parties, potentially catastrophic and expensive outcomes can be avoided.

Case study

One such example involved a case where Paul Bailey mediated on behalf of two individuals whose Limited Liability Partnership (LLP) business had broken down. By the time BABR was consulted, the two were no longer on speaking terms, negotiations had stalled and they were both communicating via lawyers.

In principle, the solution was clear: one partner needed to buy-out the other partner and continue to trade. However, the partners were unable to agree on a value for the business and as each day passed, the breakdown in their relationship meant that the business was continuing to deteriorate; customers were leaving, profits were turning into losses and jobs were under threat.

We were instructed to assist both partners in negotiating a solution, with Paul Bailey acting as mediator. Paul brought a highly specialised skill-set to the mediation process, including:

  • Strong commercial acumen;

  • An in-depth understanding of insolvency legislation;

  • A thorough grounding in finance and law;

  • Excellent communication skills;

  • Awareness of stakeholder issues;

  • A knack for problem-solving.

As a result, Paul Bailey was able to help both parties come together to negotiate, agree on a fair value for the shares of the LLP, and draft an agreement that enabled one partner to continue trading the residual business and the other partner to exit.

Whilst both partners had to compromise as part of the mediation process, the outcome was far better than a formal winding up of the LLP, which would have had negative implications for all stakeholders.

If you or your clients would like more information on any of the issues featured, please contact us for a confidential chat or a free consultation.