Last week, Hayden Bailey from Boodle Hatfield and Liz Cuthbertson from Mercer & Hole presented and ran a series of group discussions on Succession and Planning for Family Businesses at the TAG Alliances Hybrid Conference Pop-Up in London for an international audience of legal, tax and other advisors.

While the discussions highlighted how family governance tools, tax, domicile and residence rules could differ significantly from jurisdiction to jurisdiction, the underlying issue of the desire on the part of most family businesses to achieve fairness across the family quickly emerged as a unifying theme. Succession planning, management considerations, dividend payments - all of these and more are informed by the question of how to meet that goal, with each new generation bringing added complexity and challenges as the family tree continues to grow. This ever-growing complexity may be one of the reasons why statistically few family businesses in the UK endure beyond the fourth generation.

A second theme that emerged from conference delegates related to the impact of COVID-19 on the different generations in family businesses. Many felt that the pandemic had made the older generation more aware of their own mortality and consequently more inclined to begin handing over the reins earlier than they might otherwise have done. For the up and coming generation, however, the effect was to make them reflect on what really mattered to them and what they wanted out of life and, in particular, whether that included being involved in the family business at all.

Overall there was general agreement that things continued to be complicated for family businesses with each individual business requiring bespoke solutions based on an understanding of the family's wishes. Advisors' ability to ask, and obtain answers to, key questions will ultimately determine how well they can contribute to a family businesses' long-term success. As one delegate put it, 'Once you've seen one family business, you've seen one family business.' i.e. there is no one size fits all approach.

So what kinds of questions should advisors be asking? While the below is far from a canonical list it does make an excellent starting point:

  • Does the business have buy in and engagement from the whole of the family i.e. are the family agreed on a shared purpose with a clear understanding of why they are in business together in the first place? What level of involvement with the business do individual family members want?
  • Has the family considered the impact of taxes in every relevant jurisdiction as part of its equity sharing arrangements?
  • Are the family agreed on the best way of ensuring effective management and control of the business going forward? Who will sit on the board and have voting rights? How can shares devolve on death?
  • How quickly is one generation prepared to hand over control to the next and is there a formal process in place to support this handover?
  • To what extent that these questions and family business policy be codified into a blueprint for a successful succession?