Insights into specialist directors – corporate litigation and company directors: horses for courses

A good board is a blend of relevant skills and experiences. A company’s critical needs can change quickly to include dispute management skills and experiences. Commercial disagreements and regulatory infractions can happen for any company. The problems can escalate if not handled in a planned way.

I have become a director of companies when they had no anticipation of events about to occur – disputes in the USA, Turkey, Brazil and the United Kingdom. I have become a director of companies that unexpectedly became victims of fraud from within (in Turkey and the UK). I have also been brought on to boards specifically to help handle existing disputes which the incumbent board needed specialist help with (in the UK and Jersey).

I see corporate litigation as a balance sheet item. A successful claim can create a valuable asset. A successful defence to a claim can significantly reduce or eliminate a liability.

My new clients in this category come to me to add a specific skill set to the board. They come, first, from litigation lawyers, fund managers and corporate services providers who recognise the board’s skills gap and, secondly, from other directors not as comfortable as me with the confrontational environment and who do not wish to hold the reins.

What exactly are clients looking for –

Front-line willingness

A director enthused by planning and leading, positioned between the lawyer who manages procedure and advises on strategy and the full board with which the director liaises continually, ensuring no information is known only to him.

Strategy management

The objective is to win, but a “win” can be a compromise. Sometimes a swift conclusion on best terms negotiable is better than a drawn out, expensive slog even if ultimately successful. All participants in litigation come off worse to some extent, and the drain can increase exponentially with the duration. Litigation takes your eye off the ball, human efficiency is reduced by the strain, and the direct financial cost can snowball. Planning a strategy to achieve the “win” is where the right experience and ability are so important – working out which cards the opponent is holding and finding out what motivated the opponent.

Knowing the right legal team

Someone who knows the market for lawyers and, when you need them, which lawyer best fits the needs of the challenge, and how to be specific on the terms of engagement so each knows what to expect from the other. Disputes are expensive. Getting the right legal support on the right terms is part of controlling that.

Knowing how to fund

Understanding the market for litigation funding and deciding if the company can benefit. Knowing which commercial funders have the best experience of the kind of dispute involved. Knowing that the funder has the appetite for this specific claim will make everything easier and have a strategic impact when the other side learns about the appointment. Knowledge of where the funder’s own cash supply will come from is critical. Will that come from an allocated part of their own cash reserves? Or do they have a pool of funders (investors in litigation) to whom they need to go at successive steps of the process? Uncommitted funder resources means there is no certainty the funders will come up with the goods all the way to the end.

Knowing the background

Knowing how to adjust the strategy according to the nature of the background. Breach of a commercial contract, or enforcement action by a government or licensing authority.

Tactics -v- substance

Knowing how much of the issue is tactics and how much is substance. Spotting opportunistic litigants. I have been involved in cases where I am convinced the split was 90% tactics and 10% substance.

Resolve

The director leading the charge may need nerves of steel. I have been threatened personally with legal and regulatory consequences by the other side to try and get me to back off. On both occasions I took that as the best complement they could have paid me. Neither threat was pursued. Who is right, and who blinks first?

My own experiences

One substantial case involved a family in dispute over wealth held in a family trust. I was appointed by one family faction to the boards of trust-owned companies. Another was an appointment by a listed Canadian company to the board of a Jersey joint venture company financing oil exploration and production in Iraq. In each case, as usual, there were attempts to enlarge one side’s slice of the cake at the cost of the other side. Case studies are on my website at, respectively –

https://www.gardner-hillman.com/work/in-the-middle-of-family-conflict/, and

https://www.gardner-hillman.com/work/black-gold-turns-into-black-mud-tensions-between-appointees-expectations-and-directors-duties/