Family business: Trouble and strife

That you choose your friends but not your relatives is a truism. You can also choose with whom to go into business and for many that choice is family and friends.

By Greg Gardner-Boyes, partner, KBL Solicitors.

Family businesses are unique and disputes between business “partners” still happen irrespective of any blood link between them.

Often a family business dispute has at its core an imbalance (or perceived imbalance) of “contribution” which may not be reflected by reward.

If one party to a business collaboration fails to pull his or her weight or to ”earn” his or her remuneration then it will create problems.

Sometimes friends and those who are related can deal with such problems quickly but generally they are slower to share the tough message with those who they feel are being carried.

Another common area for dispute is succession.

When the business was started there will have been built into it a plan for dealing with contingencies. As the business matures and is passed from one generation to another the future goals and aspirations of family members are often over looked.

A well thought out succession strategy is important. It can help to ensure against:

The business having to be sold. • The removal of a spouse, son, daughter, cousin, nephew, niece, aunt, uncle. Negative impact on other partners / directors / shareholders. Adverse effect on the liquidity of the business. Working with family members and friends demands an awareness that the needs of your enterprise come before a fear of hurting someones’ feelings. Accept this principle from the start and the tough conversations will perhaps be less likely. KBL’s corporate team have significant experience in working with family businesses advising on succession plans and the preparation of agreements to help address potential disputes that may arise as the business develops.