Business disputes are inevitable parts of running a business. They relate to any kind of disagreement over the terms of an agreement that has been signed between two businesses or between an individual and a business. There are different types of business disputes, which means that various types of actions can be taken when you are in a dispute. While these disputes can be financially draining and irritating, there are ways to resolve them.
Common areas of dispute
Some areas of dispute are more common than others, so it is important for business owners to be aware of these areas to prevent them at the outset. Some of these areas include:
- Employment disputes
- Contractual disputes
- Bankruptcy and winding-up
Ways to minimise conflict and dispute
Before taking any legal action, there are at least three steps that businesses can take to limit the amount of business disputes that they may encounter:
- Set up policies and procedures: They can help govern day-to-day transactions and interactions with other businesses and individuals, so the possibility of being involved in disputes can be reduced.
- Put everything in writing: Certain disputes arise due to a lack of documented business arrangements, especially when arrangements have been agreed orally. Putting everything in writing helps minimise disagreements on what the parties have originally agreed to. In addition to signed contracts, written records can also include email or instant messages.
- Adopt and develop collaborative practice: Using a collaborative approach and encouraging settlement and negotiation (e.g., mediation and arbitration) rather than litigation not only helps to avoid the expense of courtroom litigation but also improves business relationships between the parties.
Legal actions
If, at the end, the disputes have not been resolved, there are also a variety of legal actions that can be taken:
- Employment disputes: Employment disputes may arise from payment of wages, termination of employment, Mandatory Provident Fund, leave, end of year payments and other employment conditions. If you are involved in a dispute in relation to employment contracts, you may seek preliminary consultation or voluntary conciliation service from the Labour Relations Division of the Labour Department. If you wish to initiate legal action against another party or defend a claim made by another party, your case will be heard by the Labour Tribunal. For claims relating to work-related injuries, they will be brought before the District Court. An employment claim may be brought under the Employment Ordinance (Cap. 57), the Factories and Industrial Undertakings Ordinance (Cap. 59), the Employees’ Compensation Ordinance (Cap. 282), the Occupational Safety and Health Ordinance (Cap. 509), the Minimum Wage Ordinance (Cap. 608), and other employment-related ordinances.
- Contractual disputes: Contract disagreements may arise between businesses and contractors, suppliers, purchasers or other businesses or individuals. A party may then bring a civil case against the other party to claim monetary compensation. If the monetary claim does not exceed $75,000, the case will be heard by the Small Claims Tribunal. If the claim is over $75,000 and not more than $3 million, the case will be heard by the District Court. If the claim is over $3 million, the case will be heard by the Court of First Instance of the High Court.
- Bankruptcy and winding-up: When you wish to close your business or other person’s business, bankruptcy and winding-up are methods of the last resort. Bankruptcy is an insolvency legal process taken against a person (e.g. a business owner), whilst winding-up is the process of dissolving a business. Matters relating to bankruptcy and winding-up are primarily governed by the Companies (Winding-Up and Miscellaneous Provisions) Ordinance (Cap. 32) and the Companies Ordinance (Cap. 622).
Key takeaways
- It is always better to avoid disputes at the outset by taking preliminary steps.
- However, disputes are inevitable and if they need to be resolved by legal actions, the types of legal actions that you will resort to will depend on the nature of the dispute and the amount of compensation that you wish to claim.