In the article “Final Offer Med-Arb in Shareholder Disputes,” Yarden Gershony proposes an alternative dispute resolution (ADR) mechanism called “Final Offer Med-Arb” (FOMA) for resolving shareholder disputes in closely-held companies. FOMA involves appointing a neutral third party to serve as both a mediator and an arbitrator with the aim of efficiently and fairly separating the shareholders’ corporate interests. If the mediation phase is unsuccessful, the mediator transitions into an arbitrator to conduct a “final offer” arbitration.
The article presents a hypothetical scenario of warring shareholders in a closely-held company and underscores the challenges of resolving such disputes without a shareholders’ agreement. It discusses the drawbacks of pursuing a court petition under the Business Corporations Act (the “BCA”), which may result in uncertain outcomes, escalating costs, and strained personal relationships. The article encourages legal counsel to consider FOMA as a cost-effective and less adversarial method for resolving shareholder disputes in closely-held companies, providing a structured and fair approach to preserving business relationships and promoting a more amicable resolution.
Originally published in the March 2023 issue of The Advocate.