Family businesses are the backbone of the economy in many countries, including India. However, conflicts among family members can threaten not only the continuity of the business but also personal relationships. Disputes over inheritance, succession, and management can quickly turn into long and exhausting legal battles. But is there a more efficient and less traumatic way to resolve these conflicts?
A recent study, published in the Humanities Journal, conducted by researchers specializing in law and mediation and selected as “Editor’s Choice” by the journal’s editor-in-chief, Dr. Maria Cusipag, analyzed how alternative dispute resolution (ADR) methods, such as mediation, arbitration, and conciliation, can be effective tools for handling conflicts in family businesses in India. The research highlights that these methods can not only preserve businesses but also protect the well-being of children involved in these family enterprises.
The risks of taking family business disputes to Court
In many countries, conflicts in family businesses often end up in court. However, legal proceedings come with several drawbacks, such as:
🔹 Long and costly processes: Lawsuits can drag on for years, consuming financial resources from both the business and the family.
🔹 Damage to family relationships: The adversarial nature of litigation can deepen disagreements and even permanently sever family ties.
🔹 Public exposure: Court cases are public records, which can harm the company’s reputation and the individuals involved.
🔹 Emotional impact on children: The study found that children in business families can suffer from the tension created by prolonged disputes.
Given these challenges, the researchers argue that alternative dispute resolution (ADR) methods may be more advantageous for resolving conflicts without relying on the traditional judicial system.
ADR: an efficient path to resolving family business conflicts
The study examined the effectiveness of mediation, arbitration, and conciliation in family businesses in India and concluded that these methods offer significant benefits:
✅ Preservation of family bonds – Unlike an adversarial court battle, ADR fosters a collaborative environment, helping family members find solutions that benefit everyone.
✅ Faster and more cost-effective solutions – Mediation and arbitration are less bureaucratic and quicker than lawsuits, reducing both financial and emotional costs.
✅ Privacy and confidentiality – Unlike court cases, which are public, ADR allows negotiations to take place confidentially, protecting the reputation of those involved and the company.
✅ Flexibility in decisions – While courts strictly apply the law, mediation and arbitration allow for customized solutions that take into account the specific context and needs of the family and business.
The research highlights that countries that have adopted policies encouraging ADR in family and business disputes have seen a significant reduction in litigation rates and higher satisfaction levels among the parties involved.
The “Mediation First” Model and the Indian reality
In countries like the United States and the United Kingdom, the “mediation first” approach has been promoted as a mandatory step before a court case can proceed. This model encourages parties to attempt amicable resolution before resorting to legal action.
In India, however, this model is not yet mandatory, although there are initiatives to promote its adoption. The study suggests that implementing a structured mandatory mediation system could significantly reduce the burden on the judiciary and provide fairer and more efficient solutions for family businesses in conflict.
Are alternative dispute resolution methods more effective than going to court?
Given the challenges and negative impacts of litigation in family businesses, the research reinforces that alternative dispute resolution (ADR) methods can be a more effective, faster, and less burdensome solution.
Using mediation, arbitration, and conciliation can help maintain family harmony, ensure business stability, and allow future generations to take on their responsibilities without the burden of unresolved conflicts.
Therefore, when facing a deadlock in a family business, considering ADR alternatives can be a more strategic and healthy path for all parties involved.
💬 Do you believe family business disputes should be resolved outside the courts? Have you had any experience with mediation or arbitration? Share your thoughts in the comments!
Read full article on the Humanities Journal website.
This reaserch was conducted by:
Deepali Rani Sahoo, Symbiosis Law School, India
Khushi Bansal, Symbiosis Law School, India
