They say that you can choose your friends but not your family. But what happens if you choose to run a business with your family, is trouble then guaranteed or can a way through to commercial harmony be found? Adam Bernstein investigates
David Emanuel, chairman and a corporate law partner at VWV, thinks that every family business dispute will be different, but there are common themes, many of which are obvious. The most frequent tend to involve a lack of succession planning which leaves the next generation feeling frustrated, or uncertain about what comes next and which of the next generation should be involved; differences over strategic direction – a family owned lifestyle business or one that demands external management expertise at the expense of family members employed in the business; and different attitudes among or across generations on whether the business should stay in the family or be sold, and who decides.
But other issues can drive a wedge between family members, and some of them, reckons Philippa Dempster, Managing Partner of law firm Freeths, may be very trivial but can become significant. And money is often the root cause. She says “remuneration can often lead to a dispute if one family member feels that they are not being financially rewarded as well as another, or if they feel others are not pulling their weight in the business but being remunerated the same as those that are taking a key role in driving the business forward.” On top of this is what happens when one family member feels that they are not being included in decision making, however small that decision may be.
Problems do fester and can grow out of proportion. And it’s something that Emanuel has seen: “Over time failure to address issues can create tensions and unhappiness among the family, which can spill over into disputes which are not easy to resolve.” He’s seen first-hand that family businesses which put in place family charters or shareholder agreements have a framework to help work through issues. Those without any governance structures in place will, he says, struggle.
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