When it comes to popping the question, picking out a ring and location can seem like the most important elements, however, unsurprisingly many forget to consider the impact a marriage can have on the family business, Duncan James, from family law firm Shakespeare Martineau, ties the knot.
Although this doesn’t sound like the most romantic of thoughts, ensuring you are ‘proposal ready’ by considering the impact it may have on shared family assets will help owners to protect the family wealth when welcoming newcomers into the fold.
Although many family businesses are built on close relationships, losing control of the business to in-laws can be a frightening prospect for owners. With complex family structures now a regular occurrence, putting the correct contingencies in place is more crucial than ever. With prior planning and open communication, family businesses can use ‘outsider’ input from new in-laws to their advantage, while protecting the fortunes of the business in the process.
Although relinquishing control of the business to in-laws can seem risky, welcoming fresh blood into the business could be exactly what is needed and separating personal feelings from professional judgment is the key to making smart business decisions. It takes a confident business owner to identify when external expertise is needed and looking outside of direct family members could provide the answer if handled with care.
The desire to keep control within the direct family circle is natural for owners. However, those who are reviewing their succession options or welcoming new members into the family can benefit from having open and honest conversations. Separating business from family politics is essential when instigating conversations with in-laws or anyone looking to join the family business. Despite this, many family members are cautious about bringing the subject up for fear of upsetting the family unit; but doing nothing can leave family businesses exposed to significant risks.
Simply sitting round the kitchen table together to discuss the business can be challenging and it may be useful to seek outside help to get the ball rolling. External advisers can act as a critical friend to challenge and prompt conversations about the business and its growth strategy in a neutral environment, while helping to diffuse any potential family tension.
There are several ways to protect the family wealth when in-laws want in on the family business. Ownership strategies can be created to add a layer of protection and ensure direct family members still maintain the controlling stake. For example, share options can be put in place to ring-fence finances or separate out the value of the business into capital ‘before’ and ‘after’ the new addition joins the business. As a result, the new member will take their share from the new wealth that they create, rather than what already exists. For some families, it can help to put in place a ‘constitution’, which defines roles and responsibilities of each member of the business. Ideally, this document should be reviewed and discussed regularly so all involved feel part of the decision-making process.
Practicality must prevail to avoid potential disagreements over the family business after the big day. Ensuring that the appropriate provisions are considered when marriage is on the cards, will provide some protection should the relationship break down in future. Finally, as pre and post-nuptial agreements are beginning to be recognised in UK courts, it is wise to consider such concepts where large sums of wealth and complex family structures are concerned.
Duncan James, head of family business at law firm Shakespeare Martineau.