Family business disputes among toughest to mediate: Gossin

By Staff

Early mediation can help family business owners get to the root of problems before they spiral out of control, says Toronto mediator Eric Gossin.

Gossin, a mediator with Devry Smith Frank LLP, tells that disputes among the principals in a family business are among the most difficult to resolve because of the years of family dynamics bubbling up beneath the surface of whatever the most recent disagreement happens to be.

“There are emotions at play that you don’t get in a case between a bank and borrower,” he says, comparing the nature of family business disputes to those in his estates mediation and family law work, where long-held personal grievances and sibling rivalry can get in the way of rational decision-making.

“Disputes can arise in many ways, but in my experience, it’s almost always tied to family relationships, rather than exclusively about the nature of the business.”

As a result, Gossin encourages parties to hire a mediator as soon as there are signs of disagreement over the direction of a family-run business.

“I think families benefit from sitting down with a mediator, experienced in both commercial and family disputes, to work out what is happening before things deteriorate and everyone lawyers up,” he says. “Usually, they’re well into the litigation by the time they get to the point of mediating, and the family dynamic has been stripped of anything positive.”

Gossin says disputes most commonly emerge over the future plans for the business — and transitions between generations of owners are a particular flashpoint.

“Parents might have different ideas from their children about how to run the company,” he says. “Or brothers and sisters might disagree over what should happen.”

Another common scenario sees resentment fomented when a child with many siblings takes on a larger role in the parents’ business.

“Some parents want to keep a level playing field between siblings, even though one is more active than the other, which can be hard to accept for the child who is working and wants to see some advantage,” Gossin says.

In one of his cases, he says a parent who offered to sell the family business to a highly involved child caught flak from a less-engaged clan member who believed the deal was too generous to their sibling.

“Family resentment ensued, virtually to the end of time,” Gossin says.

In other cases, more distant relatives without much else in common can find themselves thrown together to co-operate in the operation of the family business, he says.

“All kinds of nastiness can occur, and the conflict can take over the business,” Gossin says.

But a bit of familial distance is not always a bad thing, he says, recalling another case in which brothers-in-law were able to put their personal differences aside for the sake of their shared business.

“They were both smart enough to realize that they were successful because of what they each brought to the table,” Gossin says. “That sometimes gets lost.”

Whatever the details of the case before him, Gossin tries to gain an understanding of the family backstory, encouraging parties to confront deeper issues standing in the way of functional management.

“A skilled mediator has to be sensitive to the long history that is involved, and the nature of all the different relationships,” he says.

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