Business as a family affair

But when things go wrong in a family business, the impact can be devastating.

Protecting the company and the relationships is crucial says Mark Alexander, head of commercial law at Vincents Solicitors.

He says: “Managing risk in a family business is a unique proposition, so planning for all eventualities should be a vital consideration in protecting both the business and the family from problems arising further down the line.

“Having family members working together can be hugely positive, as they often demonstrate a greater commitment and loyalty than outside employees.

“Unfortunately, it is also a melting pot for conflict, and dealing with it successfully could mean the difference between saving the business or not.

“Problems can stem from a number of sources including marital breakdown, sibling rivalry, resentment from other members of staff, and failures in succession planning.

“Keeping it all-in-the-family can also be a risk to the business if it precludes the company from bringing in experienced staff for specific roles - such as management, financial or marketing expertise -to help the business fulfil its potential.

“Family businesses also need to be wary about favouring, or being seen to favour, relations over other employees.

“It could lead to friction between staff members, demotivation or, in the worst case scenario, a claim for discrimination from the non-family employees.

“To this end, and to protect the business, serious thought should be given to the roles of all family members employed within the business, and there is no benefit from having poorly qualified or inexperienced relations in senior positions

“Having a well drafted and comprehensive Shareholders Agreement will at least provide a framework in the event of disputes or issues being encountered.

“By covering matters such as the appointment of directors, the transfer of shares, employing family members and dispute resolution procedures, if a dispute were to arise all sides know where they stand and what procedures are to be followed.”