3 Things Accountants Need To Know About Disputes
- Early resolution leads to better outcomes
- Engaging independent parties is crucial
- How you can avoid being caught in the middle of bitter fights
Times of stress and change can lead people to question many aspects of their lives and COVID certainly has brought about some degree of personal stress and change for all of us.
For some, this can be a very positive experience and for others it can lead to questioning life choices, dispute, separation, and litigation. In the last few months we’re already starting to see an increase in enquiries as a consequence of litigation between partners – be it business partners or life partners – as people set about untangling their affairs from other parties.
As accountants, you’re often the first port of call for clients who find themselves in a sticky situation that involves assets or money. It’s really important to tread carefully in these circumstances to avoid being caught in the middle – should the blame game begin. As professionals we all know what a toxic combination high level stress and money can be. Here are three things you need to know about partnership disputes to help you and your clients through what can be a very trying time:
The faster the dispute is resolved, the better the outcome for everyone
This one’s a bit of a no-brainer, but often something not adhered to due to lots of back and forth, heel dragging and general lack of urgency to deal with the problem. A fast resolution means it’s more cost effective, causes less mental stress (there’s nothing worse than a dispute dragged out unnecessarily – this can lead to all sorts of other issues, particularly in personal lives), more money for the stakeholders and will help to maintain business value. The longer the dispute, the more damage done to the business, the less money left for everyone involved.
Engaging independent parties is crucial
In the same way that accountants are often called upon as an independent party for businesses, there are a bevy of other professionals who can assist in partnership disputes for a truly unbiased scenario. Working with clients over a long period often leads to personal connections – sometimes friendship – that makes remaining objective hard if not impossible. Independent advisors are not emotionally motivated to achieve a particular outcome or response. It’s also much easier for them to be the ‘bad guy’ and tell a few home truths that can be very hard to do when you know your client. The last thing you want is to lose business as a result of their dispute.
A quick review of APES 110 Code of Ethics will remind you that accountants must ensure they remain objective and alert to circumstances that can lead to bias – particularly unconscious bias. Be sure to protect yourself.
How you can avoid being caught in the middle…
Becoming the meat in the sandwich between warring clients is not fun, and if not handled well, can lead to the loss of both parties as clients, with allegations of unethical behaviour levelled at the accountant in worst case scenarios.
Clear communication is crucial here and the clients must understand that the accountant needs to be impartial and as such will use tools to remain so (for instance, by engaging an independent expert as per above).
Consideration should also be given as to whether you can or should continue to act for both parties. It is important to ensure when dealing with joint interests that dealings are transparent (for instance, sending reports for the company to both parties) so that there can be no accusation of ‘taking sides’. Get authority to undertake work from both sides before commencing and importantly, get paid up front.
Where does Brooke Bird fit into this?
If a relationship needs to end then finding a collaborative solution is always the preferred option – and this is where we can help. We are independant and have the expertise to resolve disputes quickly. There are a growing number of professionals who now practice in this space where a collaborative process is adopted by the parties, avoiding the stresses and the costs of formal litigation – a road that no one wants to go down.
Where two partners are looking to separate their business affairs, we are often engaged to assist with an independent review of the business so that offers by one partner to acquire the business from the other can be assessed on an informed and impartial basis. Alternatively, we assist with the sale of the business. By adopting this approach, it can avoid the “lawyers at 60 paces” which can result in distracted people, making emotional decisions rather than making decisions for sound business reasons. It also avoids businesses becoming burdened by the significant costs of a fiercely contested legal battle.
However, despite best endeavours some relationships become so toxic that the only option is via the litigation route. If this is necessary then having the client understand the strengths and weaknesses of their position will provide them a strategic advantage and avoid them making decisions that could cost them dearly.
Irrespective of whether the dispute can be resolved amicably or needs to take the legal path, as independent specialists we can assist with:
- business valuation estimates and exit strategies
- business diagnostics and turnaround
- account reconstruction
- asset tracing, recovery, and realisation
- sale of business
- estimating distressed business value
- stakeholder management and
- expert witness reporting
As we move forward with our recovery from the pandemic you are likely to be involved in dealing with separation of clients. Ensuring your integrity, objectivity and professional behaviour cannot be challenged is very important. If you need help, please reach out to us and see how we can assist.