By Sam Lyon, Head of Corporate and Commercial, Cartmell Shepherd Solicitors
Conflicts in family businesses can be considerable and, unlike other businesses, there is usually even more than just the commercial success of the business at stake.
Thinking about things in advance, particularly some of the most vulnerable and sensitive areas, can allow family businesses to plan ahead and reduce the risk of issues arising or at least their impact on the business and family relationships.
Family businesses who overlook key issues can leave themselves exposed to risks that non-family businesses may not be.
The current pressures and uncertainties have increased the likelihood of tensions coming to the fore, but also present the opportunity for family businesses to consider these areas.
So here’s some key issues to be thinking about:
Day-to-day management decisions
Who decides what? Is the decision-making responsibility clearly defined and what happens if a decision can’t be reached?
Who owns a part of the business now and who may do so in the future? What happens if anyone chooses to leave the business, becomes ill or passes away?
Conflicts of interest
Do any family members have other business interests and how do these sit alongside their role and responsibilities to the family business? What if family members wanted to take on new and possibly competing roles?
Some owners may rely upon income from the family business more than others. Is the drawings or dividend policy fair?
Relationship between family and non-family workers
Are there clear expectations of family members and are they adequately incentivised? Is the treatment of all workers sufficiently fair?
Relationship with non-working family owners
Is there good communication and sufficient information provided to them about the business?
Would the family business benefit from non-executive directors or senior employees who can bring the benefit of independent views and perspectives to the table?
Once you have worked through all these issues, the outcome can be used to inform and put into place governance structures which allow for the sustainable success of the business for the current and future generations. So while you might feel you don’t have time to deal with these questions right now, those who do deal with these issues could well be saving themselves much more time, effort and money further down the line.
If any members of the Family Business Network would like further advice, at Cartmell Shepherd we are always at your side, so don’t hesitate to make contact.