Families can be challenging at the best of times. And when you’re working together in the family business – or dividing up interests - it’s very easy for tempers to flare and professional working relationships to be overcome by old sibling rivalries and resentments. So, how do you ensure that family businesses remain strong and productive for decades and that old hurt and arguments don’t emerge and destroy everything that you’ve built?
Be realistic about the circumstance
If you have two siblings who have always hated each other then the likelihood of both being able to be peaceful shareholders in the business is probably fairly small. Also, if the business is being unequally split between a number of siblings then, unless there’s an obvious and clearly set out reason for this, cries of unfairness are bound to result. Whether you’re looking to pass the business on to children in future or considering bringing younger members of the family on board right now, it’s important to be clear headed about the potential issues that this could create.
First and foremost, protect the business
This applies particularly to an enterprise that you are leaving to siblings as an ongoing interest in your Will. If there is any potential for the kind of conflict that could destroy the business or make it difficult for it to be successful on an ongoing basis then you need to consider this now. A good solution is to appoint a third party in a position of authority. Make sure it’s someone impartial who is not a member of the family. If this person holds a certain amount of authority (for example, you make them the Chairman) then you have a safeguard against sibling wars getting out of control. They will be able to take a step back from whatever is going on and offer the kind of impartial advice that could calm the situation down.
Be careful with succession planning
The traditional view taken of business succession planning is often that shares should be left equally to children. This may work for you or it may not. There may be one child who is particularly well suited to taking over ownership of the business – perhaps they are already working in it. If that’s the case then it might actually be wiser to give that child full ownership and to compensate the other child in a different way.
Build in some safeguards
The first stage of safeguard is the shareholder agreement. This is the document that will dictate what happens if problems should arise between sibling shareholders. You can tailor this based on your personal experience and what you know of the siblings so that all eventualities are catered for. You might also want to consider providing for de-merger or the exit of one of the siblings from the business. In some situations this is the only option and can be quickly achieved via alternative dispute resolution or legal proceedings.
Dividing up a company between siblings – or bringing them on board - is always a difficult process, especially so when they don’t get on. Careful thought needs to be given to the way this is done to avoid a situation where a sibling war destroys everything that has been built.
For further advice please contact David Aird on 01253 629300.