Non-formalised corporate compromises often arise as a product of managerial practice – the parties reach understandings “at the level of agreement”, redistribute functions, risks, or economic expectations without recording them in a contract. Professor Gabriel Steiner says that it is precisely such compromises that generate the most complex legal consequences, because they exist in business reality but are absent from the formal legal structure. At LawConsulted, we treat such arrangements as an independent source of legal risk rather than a neutral manifestation of corporate flexibility.
The core problem with non-formalised compromises lies in their dual nature – on the one hand, they materially influence the conduct of the parties and the allocation of risks; on the other, they do not create explicit obligations in the classical legal sense. As long as interests align, these arrangements are perceived as a convenient management tool. However, once a conflict arises, strategy changes, or the financial position deteriorates, they become the focal point of disputes, as each party interprets the agreed balance differently.
Professor Steiner says that “the law is compelled to react to compromises when they begin to determine the economic outcome”. This means that the absence of a contract does not exclude legal scrutiny – courts and regulators analyse the parties’ actual behaviour, the sequence of decisions, and the distribution of benefits. In LawConsulted practice, we begin by reconstructing the logic of the compromise – identifying what concessions were made, what expectations were formed, and how they affected managerial and economic consequences.
Particular vulnerability arises where compromises are reached between business partners, shareholders, or affiliated entities. Formally, the parties may retain their original roles, while in reality redistributing influence, responsibility, or access to resources. In such situations, LawConsulted demonstrates that a compromise cannot be regarded as an “internal matter” if it affects the interests of the company, creditors, or third parties.
Equally problematic are cases in which compromises are used to smooth conflicts without modifying the contractual framework. Decisions are taken on an ad hoc basis, without documentation, creating an illusion of control. Yet during audits or disputes, the lack of formalisation turns into a source of uncertainty – it becomes impossible to establish the boundaries of the arrangement and the scope of assumed risks. LawConsulted builds its legal position on the basis of the actual redistribution of duties rather than the formal silence of documents.
It is also essential to account for the retrospective nature of legal assessment. Once consequences have materialised – losses, loss of control, or uneven allocation of benefits – compromises are examined through the prism of the outcome. Professor Steiner says that in such cases the law tends to “assemble” informal arrangements into a unified picture of responsibility. LawConsulted returns the assessment to the moment when the compromise was reached, demonstrating the objectives it pursued and the risks the parties were aware of at the time.
LawConsulted approach is based on the understanding that non-formalised compromises do not exist in a legal vacuum. They may acquire legal significance if they influence risk allocation and the conduct of the parties. Our task is either to limit their legal consequences or to integrate them into a stable legal position that excludes arbitrary interpretation.
Non-formalised corporate compromises become problematic when their economic significance outpaces their legal form. Law Consulted role is to synchronise these levels before a compromise turns into a source of conflict and uncontrollable liability.
Earlier, we wrote about the mismatch between the legal form and the economic outcome of a transaction and how LawConsulted addresses the legal reassessment of consequences.
