Disputes between shareholders greatly affect companies in terms of both sustainable development and economic losses. The extent of the said damage will depend on the type of dispute. It includes the scale of the company, its industry of operation and the chosen dispute resolution method will also influence the extent of the damage. For companies operating in the financial sector or “public ones”, the said effect may be (quite) big. Therefore, companies are eager to find the right method to resolve this issue quickly.
1. Negotiations to resolve disputes
During the performance of commercial contracts, cooperation contracts, or any agreement, the parties always want to be able to negotiate in good faith to find a solution to solve a problem if there is any disagreement since it is the quickest resolve. Therefore, in the dispute settlement clause of the contract, the parties often agree on a period of time to sit together to find a common voice to solve the problem.
Negotiations help to quickly resolve disagreements without going through any legal procedures while maintaining the confidentiality of disputes, avoiding affecting the psychology of the other shareholders, and employees as well as not affecting investors or causing fluctuations in the capital market. To conduct successful negotiations, the goodwill of all parties involved is essential. The law does not provide specific guidance or regulations regarding the cultivation of goodwill in negotiations.
Therefore, companies may consider choosing an independent individual or organization to mediate negotiations when a shareholder dispute arises. The said intermediary will receive opinions from both parties and offer solutions to balance the interests harmoniously. It will help reduce tensions when discussing problem-solving, as well as avoid conflicts when the parties face each other directly.
Note: the main key to solving a dispute by using negotiation is to find a solution that can be accepted by both parties, not something only focusing solely on determining right and wrong to pressure the other party.
Find out other articles relating to Dispute Resolution in Vietnam:
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5 notable points regarding mediation in commercial disputes
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Understanding non-litigation commitments in commercial disputes
2. Choose to mediate at Commercial Mediation Centre
Currently, to reduce the workload of prosecuting agencies, the method of mediation at the Commercial Mediation Center whose results are recognized by the court under a specific process is recognized as a method of dispute resolution and will be carried out by mediators. This method is chosen by some shareholders and companies when the conflicts are not too complicated and the parties want to quickly solve the problem as well as control the issues of information security, save costs, etc.
However, this method contains some disadvantages which make the parties hesitate to choose it to solve the dispute, particularly the most concerning factor is the low compliance and enforcement when one party refuses to implement the agreed content (the result of mediation). In addition, whether the court will recognize the mediation process and the agreed content of both parties or not depends on its consideration and consideration. These “open” points of the commercial mediation method are the reason why this method is less chosen by the parties to resolve the dispute, instead, the parties will go straight to the court or arbitration method.
Find out other articles relating to Dispute Resolution in enterprises:
- 6 interim urgent measures applied in arbitration cases in Vietnam
- Dispute resolution clauses in business contracts in Vietnam
3. Select the Courts or Arbitrators to resolve disputes
If negotiations fail to reach an agreement, either party can initiate legal action. This can involve taking the dispute to court or arbitration. In which, depending on the agreement of the parties to determine whether the Arbitrator can be selected or not, particularly if there is any agreement between both parties on this matter before or at the time of the disputed incident. In case, the said agreement does not happen, the Court is the preferred authority for resolving the conflicts. Court or Arbitration is the most chosen method by shareholders due to the deterrence and enforcement of the rulings of these jurisdictions.
However, please note that in practice the processing time of these methods to resolve the case may take a while, especially for a court agency compared to the time prescribed in the law. The reason for the above fact is the overwhelming workload of the Court. Besides, the complication of the dispute, for example, the number of participating parties, the nationality of shareholders, etc. may also be one of the reasons.
Find out other articles relating to Courts and Arbitrators:
- Legal guide for arbitration and alternative dispute resolution in Vietnam
- Delineate the competence of commercial arbitration and courts in Vietnam
- Enforcement of arbitral awards under Vietnamese laws
For some disputes, if it is resolved by the Court, there may be some effects on the company’s normal operation as well as the shareholders. Particularly, companies operating on the stock exchange. In this case, the disputing parties usually choose Arbitration since it can use the closed mechanism (if requested) to resolve the dispute, besides its settlement time will be shorter than the court proceedings. However, it typically costs more than going to court, which is another factor parties need to be aware of the price.
Read our other articles in the series Commentary on shareholder disputes at:
Part 1: Determine shareholder disputes that often arise in joint-stock companies
Part 2: Causes of shareholder disputes in joint stock companies
The method of dispute resolution is quite diverse. In which the method to choose will depend on the content, the nature of the dispute and the needs of the parties. Each method will have certain pros and cons. Therefore, the parties need to consider carefully before choosing to avoid complicating the situation.
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