Advising Family Businesses
By Richard Horwood, Partner and Head of Private Client
The role of an advisor to family businesses, in the context of succession planning, has a tendency to be very varied and particularly interesting.It often requires not only the legal knowledge, combined with an understanding of the various taxation issues, but also a much more logical and diplomatic approach.
The different generations will often have competing interests, which can give rise to tension.It is essential that the different generations are able to articulate their views without fear of reprimand or reprisal.The family business advisor can help to facilitate these discussions, can bring a dispassionate voice to the table and can help to explain matters in a way that can be seen as less confrontational.
Whilst it is important to recognise the hard work, dedication and values that have helped to establish the success of the business, it must be recognised that all businesses have to evolve and adapt in order that they can continue with that success.The voice of the next generation can help to contribute towards that success, although there can be a danger that such voice is seen as disruptive and doomed to failure.
It is not unusual for the role to be seen as one of more being liked a counsellor, rather than a lawyer or accountant.However, with the right approach, support and structure the succession of a family business from one generation to another can be achieved.
Practical steps that might be taken are agreeing upon a forum for open discussion when everybody will have the chance to speak their views without fear of criticism.Family charters might be prepared indicating what the overall objective of the family business will be, but also acknowledging that each should be reviewed from time to time.
Experience always helps with decision making, but if there is not the opportunity for the next generation to become involved with a family business, and they cannot learn the skills necessary because of the lack of experience, then alternative arrangement should be considered.This might, for example, involve the next generation being appointed as trustees, if part of the shareholding of the family business is held within a trust fund.In this way they will become exposed to information, become involved with decision making, but in a context where there is support and, if appropriate and in place, external advice as well.
Ultimately, a successful transition of any family business will be dependent upon common goals and objectives.These common goals are much more likely to be achieved when there is the opportunity for discussion and planning.
For further insight and to discuss the possible ways of structuring matters please do get in touch.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.