Looking after the family business
So far our series on family businesses has centred on the owners of leading West Suffolk firms. Here we turn the focus on to the legal experts helping clients meet the ever-changing demands of modern industry. Answering our questions are a team from Birketts: James Austin, head of Birketts’ family owned business group, Oliver Gravell, a leading divorce lawyer, Matthew Potter, who has a wealth of experience in employment law, Rachel McKillop-Wilkin, a specialist in agricultural law and Catriona Galloway, expert in Wills, trusts and estate planning
What are the biggest challenges facing family businesses? They vary from business to business but the constant and most important challenge must be recognising the value of communication, tackling issues early and being alive to potential difficulties that may be simmering in the background. If all members of the family understand each other’s goals and aspirations it makes difficult issues, such as succession planning, much easier to address.
Are there any particular advantages that family firms enjoy? There are often shared values and an inherent trust between family members. This makes it easier to take the long view rather than be driven by a desire for short term gain. The family business is often seen as the family's main asset and preserving it for future generations is part of that long term planning. The government recognises the value family businesses bring to our economy and so, whereas many assets will be subject to inheritance tax on a person’s death, certain business assets can pass to the next generation inheritance tax free. Families that run businesses can use Wills and trusts to maximise the various tax reliefs available, whilst ensuring the business itself survives the death of a family member by facilitating a smooth transition of ownership from the older to younger generations.
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There are many farming families in this region. Their working environment is their home - there must be a lot of emotional attachments to decisions over property and assets? Buildings and artefacts can exert a huge emotional pull - they may have been with families over generations so there is often a feeling that one generation is simply a custodian for the next. Any decision which involves the sale of a business asset, whether it a farmhouse which has been occupied for many years, or the buildings from which the business was founded, is much more difficult to take, even if the business case is obvious to an outsider.
The region has seen a lot of diversification - farm shops, wedding venues, holiday homes, etc. When next generation family members want to try something new what considerations have to be made? Questions like, ‘Whose land is going to be developed? ‘Is it in the right place?’ ‘Who stands to benefit?’ need to be asked. Has market research been done which supports the business case, who will run the business and do they need training? Diversification can also lead to expansion with all that entails in terms of additional regulation. Are licences needed? What are the HR and payroll issues? What needs to be done to meet health and safety standards?
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Some farmers are moving to renewable energy which is leading to sometimes unwelcome changes in the landscape. Do farmers need different advice these days? Early engagement to try and make sure the local community is on board with your plans is important. We have had a number of local cases where taking that step has helped. An understanding of exactly what is proposed early in the process can often prevent rumours from spreading.
Have the days of families passing on the business to the oldest son gone? It tends not to be the case these days. Gender equality is better and fairer. Parents generally want to treat all of their children equally, and this can cause a moral dilemma, as often they know that it would not make good commercial sense to split the business equally. This is where good succession planning is essential.
Are there any particular disadvantages that family firms face? Almost inevitably there can be family conflicts. Deep-seated and long-lasting
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