Ownership Succession in the Family BusinessFamily businesses are the cornerstone of the British economy
The ownership succession process is an emotionally sensitive one and has the potential to create significant conflict between parents and children, and indeed between siblings themselves.
The key question in ownership succession is: “Who should own the shares in the family business in the next generation?”
There are essentially two views. On the one hand there is the view that ownership is the control and reward system for those working in the business (family and non-family). On the other hand, there is the view that the business is a vehicle for supporting the economic needs of the whole family as well as offering possible employment opportunities for future generations.
Consideration should be given to:
- Who is family – should ownership be restricted and to whom?
- What is fair – passing on the family business to those who value it and in a way that will safeguard its long-term survival.
- Control – what proportion of share capital and hence what control is appropriate
- Outsider owners – differences can breed a resentment that can be destructive to the effectiveness of the ownership group as a whole or harmful to personal relationships in the family.
It is possible to separate ownership of the business from control of the business through, for example, a shareholders agreement or the issue of different classes of shares (voting and nonvoting).