Handing over a family business to the next generation may seem straightforward but it can create unforeseen problems.
In fact, succession plans involving family members may contain more risks than handovers involving complete strangers. With strangers, people tend to be cautious and get legal advice; with family they often rely on goodwill and a muddle through attitude.
For example, it is not unusual for a businessman to hand over his firm to his sons with hardly any thought as to how they should share control and make decisions about future policy, or how they should resolve disagreements.
The result is often bitter family feuds further down the line as siblings vie for control.
The way to avoid succession problems is to prepare properly and draw up a legally binding agreement.
One key requirement is a strategy for resolving disputes. This could be done by nominating an independent third party as an arbitrator. This should be someone who understands the business and is trusted by both sides. It could, of course be the person handing over the business, but an outsider might be a better choice as it avoids the problem of parents having to arbitrate between their children with all the resentment that can cause.
The first task of the independent arbitrator would be to try to help the two sides reach agreement. If that proves impossible, the arbitrator could then make a decision on principles set down by the parent and the successors when the handover agreement was drawn up.
However, if disputes are impossible to resolve, it may be necessary for siblings to end their business relationship.
This could be done in several ways. For example, the business could be sold to a third party, in which case the handover agreement would need to state how the proceeds should be divided.
Alternatively, one sibling might buy the other’s shares. In that case, it would sensible to set out in advance how the shares should be valued. The valuation could be based on the company’s assets, its profits or by some other method.
Throughout succession planning it’s important to get advice from your accountant, lawyer and possibly your bank manager.
Professional advice is important in all succession planning but particularly if you are passing the business on to family members because emotions can easily get in the way.
Sons and daughters may feel guilty that they are demanding too good a deal from their parents, while parents may feel they are taking too much out of the business making it difficult for their children to succeed in the future. Independent opinions from lawyers and accountants can help guide and reassure both sides.
It may seem counter intuitive but the closer the family relationship, the greater the need for a formal agreement. After all, if siblings fall out in future they may not only destroy a business, they may also destroy family relationships.
Jeremy Paterson studied Economic History at the University of Leicester and then spent several years in marketing working for agencies near London. At the age of 28, he made the decision to change career and embarked on a law conversion course and LPC at the College of Law in Guildford.
In 2007, he completed a training contract in which he gained experience of civil litigation – an area of law where he found great interest and enjoyment from overcoming unknown challenges.
‘I found great satisfaction in resolving disputes’ he recalls. ‘I enjoy problem solving, simplifying complex issues, and keeping an eye on what really matters to the client’
After qualifying, Jeremy went on to specialise in civil litigation working for another firm in the Portsmouth area before working for a firm in Southampton. He joined Verisona Law as a Senior Associate in its Commercial Dispute Resolution team early in 2016.
‘I’d had my eye on Verisona Law for a while as it appealed to me from both a legal and marketing perspective,’ he said. ‘Verisona Law has positioned itself in a unique way for the local area and it has earned a great deal of recognition for the range of specialist legal services it offers.’
“Superb help, advice and support throughout. I was kept informed and updated at every step of my legal journey with Verisona Law. I wholeheartedly recommend their service.”
Anon, September 2019
“Jeremy was very efficient and detailed in my case. I would like to thank Verisona for their professionalism, understanding and excellent work to resolve my case; the outcome went over and above expectation.”
Anon, August 2019
“I can’t thank you enough for all that you have done for me as you can probably appreciate it has been a very difficult time for me but I can now move on and enjoy my life again so once again Jeremy thank you.”
Anon, June 2019
"Jeremy, thanks for all you and Verisona have done for our company. You were a source of calm in a storm. Your advice, guidance and reassurance helped us see off a serious threat to our company and its Intellectual Property."
Anon, June 2019
"We will continue to support and recommend our clients to Verisona."
Bernard Landi - Landi Accounting, August 2018
"Having recently used Verisona Law to help recover a commercial debt due to us, I would highly recommend them. Jeremy was very professional and helpful, giving information throughout the case, and he was also very calm which really helped us."
Anon, June 2018
"I would like to thank you for the first class service we have received from you. Your advice and the professional way you treated us throughout culminated in a result which, prior to your appointment, seemed a long way away."
Mr Herridge, June 2018
"Many thanks for your help and constant support."
Anon, January 2018
"I was very impressed with your support and advice in this matter."
Anon, February 2018
"Verisona have recently acted on behalf of my company regarding a HSE matter. From the outset it became very apparent to me that they were going to leave no stone unturned. I was kept up to date at any time, day or night, and they were always helpful and reassuring. They provided me with a top London barrister who specialised in HSE matters to represent my company in court. I cannot thank them enough for all their hard work in bringing this matter to a close and would highly recommend them to anyone seeking professional legal help."
Anon, July 2017
"Thanks again to the Verisona team and in particular Jeremy Paterson. It was reassuring to have an expert in my corner whilst navigating the complicated process of chasing an outstanding debt that was owed to our company."
Anon, February 2017
"I was really pleased with the help and support provided by solicitor Jeremy Paterson at Verisona Law. He acted swiftly but concisely with his in-depth knowledge of the law. He covered every possible outcome and kept me updated at every stage of the way without me having to chase him. He went above and beyond anything I have ever experienced before. Really excellent service, achieving a great outcome. I would definitely use Jeremy and Verisona again."
Sarah Dineage - Portsmouth Abuse and Rape Counselling Service, November 2016
"Thank you very much for your help in this matter, you have personally done a very professional job for me and I very much appreciate the excellent service I have once again received from Verisona."
Anon, October 2016
"Robert and Jeremy provided detailed explanations of legal processes and procedures in an easy to understand style and always made us feel at ease and supported. The dispute was dealt with to our entire satisfaction and we would certainly recommend Verisona Law."
Anon, September 2016
- 2003 Post Graduate Diploma in Law at The College of Law in Guildford
- 2004 LPC at The College of Law in Guildford
- 2005 Training contract with Addison Law in Emsworth
- 2006 Training contract secondment to Churchers in Fareham
- 2007 Qualified as a solicitor
- 2008 Specialised in Civil Litigation at Churchers
- 2013 Civil Litigation at Driver Belcher in Southampton
- 2016 Commercial Dispute Resolution at Verisona Law
- Commercial disputes
- Contractual disputes
- Property and construction disputes
- Shareholder and partnership disputes
- Landlord and tenant disputes
- Intellectual Property disputes
- Professional Negligence