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LEGAL VIEW
IN ASSOCIATION WITH:
WHEN FAMILY TIES UNRAVEL
Nothing delivers a TV ratings winner like a business family at war. From Dallas in the 1970s to the recent hit comedy drama Succession, everyone loves a big boardroom bust up.
However, in the real-world family disputes are far from entertaining for those caught up in them and can cause businesses real harm. They can even be terminal for the venture.
When relationships go sour the fallout can be devastating for all concerned. The Institute for Family Business (IFB) says that family businesses are “especially vulnerable” to relationship conflict and in the long term that can have disastrous consequences.
That’s why experts say tackling questions around governance, succession planning and next generation engagement as soon as possible can be vital to ensure long term success.
Claire Hewitt is a consultant at Burnley based CUBE HR. She says: “The success of a family business relies on the long-term vision and management, alongside protecting values and legacy.”
She says that there are several measures that can be taken to prevent family matters getting in the way of business ones.
Claire adds: “Getting the structure right can ease any tensions and the correct legal agreements will protect the company’s shareholders, leading to less risk of damage to the company’s integrity and reputation.
“Whether the business has full family control or non-family shareholders, ownership can get
Claire Hewitt
A written mutual agreement – best prepared when a business is first established – will cover the funding, structure, management and future direction should any of these issues arise.
Ben Smith, director at Blackburn headquartered business advisory and accountancy group Pierce, says: “With a fair wind, a shareholder
confusing so relying on trust alone is never advised.
“Written agreements between family members involved in the business will be required as there are just some situations where a handshake will not do. Legal protection can be provided for all those involved if the correct legal agreements are in place.”
Putting a shareholder or partnership agreement in place will govern how challenges including illness, fallouts, breakups or even death are dealt with.
agreement sits in a bottom drawer forever and a day but is there for everyone’s protection in the event of a fallout.”
When it comes to thorny subject of succession planning, Claire says: “It is vital that family business owners create succession plans so that they have a strategy in place to ensure future success.
“Moving forward can be extremely difficult if individuals have not been prepared for future work responsibilities, or even worse don’t want them.
“This will involve aligning the family vision with the business strategy and training future leaders with preparation for the transition.”
Getting succession planning right will also help when it comes to building a successful exit strategy. Claire says: “For most, this will mean preserving the legacy by passing control to another family member.
“Consideration will need to be given to whether this is the right decision as they might not have the right education, skills or experience, but early planning and consultations will get the business in shape for any departures.”
Ben agrees. He says: “Forward management succession planning is critical to facilitating a successful and high multiple exit.
“Fail to plan; plan to fail – it is no different in a sale process. Tidy all aspects of your business’ affairs ahead of a sale and plan ahead.
“In a rapidly changing economic environment, ensure your corporate structure ensures maximum protection against downside risk.
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