They're Good for Families and Good for Business.
Family businesses sound like a wonderful idea, don’t they? Two or more family members taking pride in working together towards a common goal – making a commercial success of the family firm. It sounds idyllic enough. What could possibly go wrong? Sadly, the answer is ‘plenty’.
Some argue that family businesses are bad for families and bad for business. The challenges of working together can cause family tensions and even end in permanent splits. As for the business, family relationship issues can also mean poor strategic decision making, sometimes resulting in company failure.
The way to give your family and your business the best chance of remaining intact is to introduce the services of a business lawyer – someone who can give you the support you need to keep the business secure and family relations harmonious.
What kind of disputes take place within your family business? Are they about strategy – the particular direction that your business should be taking? Are they about succession planning? Do you have a clear way of dealing with such issues? Or do you brush problems under the carpet, leaving resentment to fester? Do you foresee any of these issues ending up in court litigation? This might be the only way to resolve the issue – but what a shame for your family and how unhealthy for your business.
The way to resolve such damaging disputes is to not let them happen in the first place. You do this by bringing in a specialist business law adviser. This is the person who will help you with succession planning, shareholders agreements, mediation and negotiation, meaning litigation only takes place as a last resort. Courts focus purely on legal issues and binary outcomes and, as such, are often ill-equipped to deal with family business issues. Even when legal and factual issues have been resolved, relationship concerns may linger and prove an obstacle to effective conflict resolution. The consequences for wider family relationships, family wealth, and for employees can be disastrous.
Here at MeTTLaw, we’re perfectly placed to work with family businesses of all sizes. We enjoy a profound understanding of the interpersonal dynamics and the issues that drive conflict in family businesses.
We’ll work to resolve a wide range of family dispute scenarios, including parent and child, husband and wife, siblings, as well as family and non-family board members.
Sometimes the disputes revolve around operational decisions, such as whether or not to pursue an opportunity. On other occasions, they arise when there’s a perception that one family member is benefitting to a disproportionate degree. Frequently, conflict takes place where corporate governance structures and documentation are non-existent or fail to reflect the reality of the relationships. Sometimes these situations can persist comfortably for decades, only falling apart at times of crisis, ill-health or when a key family member dies. Often, because of loose or poorly defined structures, there is a position of stalemate and corporate paralysis.
Mediation can be by far the best route to working out a way to move forward amicably. It allows a safe space for each individual’s position to be clarified. Mediation can give each side the chance to understand the other’s point of view. A skilled mediator will allow for the exploration of options
Among the most common disputes are between older and younger generations. A good mediator will often be able to develop a solution that protects one generation’s financial security whilst giving freedom to younger family members to take the business forward and build on their parents’ experience and successes.
Mediation can help families avoid litigation. The process is private and confidential, so everything stays ‘in-house’. The METTLaw mediators can be taken on to help with dispute avoidance and prevention before conflict emerges in the first place.
Occasionally, issues can be traced back to childhood. For example, perceptions of unfair treatment when the family was young can result in resentment about succession planning, perceived responsibilities, salaries, and relative commitment to the business.
One common task for a mediator is to document governance arrangements formally and effectively. These can protect family relationships or at the very least protect the business against impasses and stalemates.
Families often structure businesses on a 50/50 basis. This can work well in sunny times, especially when the business is new, exciting and everyone is getting on well. But, one disagreement can rapidly paralyse the business. The disagreement could result from marriage difficulties or the death of someone involved in the business. In the latter case, poor or non-existent documentation can make it difficult to be clear who the new shareholders are or how they are to be involved in the running of the business. A family business expert will review existing arrangements and make sure they are amended where relevant to take account of changes in relationships and family makeup.
Time and again, mediation has proved the most successful route to conflict resolution. After all, court can be stressful and expensive. Even if you win your case, it’s rare for the court experience to be an enjoyable one. For both sides, it can be exhausting, distracting and expensive.
As skilled mediators, we’ll help you and your family members to take stock in private, reflect on what really matters and think about the potential negative consequences of litigation for both themselves and other family members, as well as for the business. We’ll support you in exploring realistic options, testing possible solutions and coming up with long-lasting, permanent and robust ways forward.
Find out more. Call us on
020 3813 2866
or send us an email.
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