In light of Prince Harry and Duchess Megan’s recent royal exit, it emphasises the question of the vulnerability of family businesses. Operating a business is often complicated enough, however, a family-owned business provides another level of difficulties arising from the emotional friction of family rivalry. Often in family businesses, the simplest disagreements can become personal and exaggerate to greater magnitudes. Family-owned businesses often evade formal agreements with family members on the premise of ‘we are family and family wouldn’t do that’. When roles and agreements are not formalized by way of a contract, complications can arise.
The best course of action in such instances to provide structure and control is to have a thorough shareholders agreement drawn up amongst the family members. This is effectively a contract between the shareholders of the company and provides additional protection around ownership and the procedures to be taken in relation to certain decisions.
The advantage of this strategy is it provides a legally binding ‘rule book’ on how to resolve disputes and therefore leaves little room for potential tensions to grow among members. Furthermore, it provides a medium where additional shareholders can be added come the next generation of family members. This, therefore, removes the emotions involved in family business, gives everyone a fair and transparent method of dealing with any issues that may arise, so that the family business may prosper.
The Corporate and Commercial Department here at Fisher Jones Greenwood LLP can guide you through the process of implementing a shareholders agreement or advising on shareholder disputes and advise you on your options; as well as assist you with the preparation of any documentation that may be required thereafter.
Should you require any information or assistance do not hesitate to get in touch. Please call 01206 700113 or email [email protected].