Dispute Resolution in Family Companies
Canterbury Law Review, 2013
31 Pages Posted: 24 Jul 2013
Date Written: July 23, 2013
The Bubble Act of 1720 made corporate charters relatively difficult to obtain. As a response to the Bubble Act and prior to the general right to incorporation by registration in the mid-Nineteenth Century, an early form of unincorporated company developed in the United Kingdom. The deeds of settlement creating the unincorporated companies almost always contained dispute resolution clauses. Once incorporation by registration became possible, the internal governance of companies was determined by articles of association. UK companies were permitted to draft their own articles or to adopt provisions found in the schedules to the Acts. Dispute resolution clauses were not included but arbitration clauses were nevertheless often included in articles of association for companies for a period from the late Nineteenth Century onwards in the articles of smaller private companies that developed at that time. The demise of the adoption of the provisions coincided with questions about their enforceability. Even though those enforceability issues probably no longer exist, dispute resolution clauses are rarely found in the constitutions of modern companies.
This article examines and critiques the legal framework around dispute resolution in family-owned companies and argues for the inclusion of dispute resolution clauses in some form in constitutions of companies. The article contains two simple empirical surveys that show that the failure to include dispute resolution clauses in constitutions and the absence of other dispute resolution mechanisms for family companies leaves the courts as the only recourse for resolution of disputes.
Keywords: corporate law, dispute resolution, family business
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