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Family issues in fast-growing businesses

New and fast growing businesses pose all kind of commercial challenges for their owners and shareholders.

Martin Karran

Martin Karran

The dynamism and emotional investment of the management is impossible to quantify.

Sadly if any of the business’ key individuals ends up in a family dispute then valuing that enterprise becomes a huge and often unavoidable problem.

This is bad enough if you own 100% of the business. Valuing current and potential worth is necessary because the business is a matrimonial asset. Issues of liquidity and the cost of extracting funds will be looked at by unwelcome third parties.

It may be even worse if you are a joint shareholder and it is one of the fellow shareholders who faces the scrutiny of a family dispute.

You may be able to live with the interference in your business day of a shareholder who is distracted by a family dispute. Do you really need your colleagues’ spouse and legal team working through your management accounts, business plans and finance agreements?

The risk of company funds being identified as “extractable” is very real and the risk of an unwanted valuation of the shareholding is equally likely.

However, there are ways that business owners can prevent or limit these risks and the potential cost and aggravation.

To avoid unnecessary legal cost is an obvious aim but you can also look to limit the disruption to the business’ daily output. A divorce may take two years to sort out and can your business and ambitions for development survive that amount of persistent disruption?

Pre and post nuptial agreements are an important and widely used option in the business community. They allow business assets to be safeguarded. They can also save business assets from unwanted third party scrutiny with all the disruption that brings.

Shareholders in a business are usually told to consider a specific shareholders’ agreement. Business owners should see a pre or post nuptial agreement as a vital and cost-efficient supplement to that. The law is hugely supportive of such arrangements.

If business owners face family disputes but without the benefit of a nuptial agreement or relevant shareholders’ agreement, then seeking early expert advice is critical.

It is straightforward to spend time and rack up fees corresponding and arguing about business assets. It is a different level of expertise to understand business structures and explain them clearly and persuasively in a family law dispute.

This is critical not just in terms of limiting cost but also to help achieve a managed and structured resolution to a family dispute.

This is our work. This is our expertise.

Talk to us about preserving business assets for you, for your children and other family members if they may be involved in the business and seek our expert advice if a family dispute is knocking on your door.

* This article first appeared in the Ward Hadaway Greater Manchester Fastest 50 Awards Supplement 2017.

For more information on the issues raised, please contact Martin Karran.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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