This week marks 'Family Business Week' - a week-long celebration championing the central role family-owned businesses play in shaping and supporting their local communities, economy and natural environment.
We know that in the UK and around the world, successful family businesses sit right at the heart of economies and communities. As drivers of growth, as employers, as innovators and philanthropists, their impact cannot be underestimated. Just like every family, every family business is unique and they face challenges other companies do not. When a shareholder’s marriage breaks down, the financial and commercial wellbeing of a family business can be put at risk. Many owners are unaware of the full powers of the English Family Court when it comes to making financial orders on a divorce and the associated jeopardy to the business.
At the end of September, Boodle Hatfield hosted the first in a series of family business roundtable discussions to mark the launch of 'A Legacy Intact' – a comprehensive guide that outlines how business owners can weather the emotional and financial storm of divorce proceedings, protect assets and avoid the loss of control in the future.
Chaired by Family Partner, Katie O'Callaghan the interactive discussion got to the heart of the range of tried and tested legal mechanisms that families and their associated enterprises can exercise to mitigate the impact of a divorce or relationship breakdown on the future of a family business. Alongside Clare Stirzaker, Charlie Hewlett, Emily Brand and Hayden Bailey, Katie highlighted how family-owned enterprises derive great advantages from the nature of their ownership, but, they also face unique risks and challenges that are specific only to them. The scale of such risk is often not well understood by business owners – particularly those in the early stages of building their legacy.
During the breakfast, the experts around the table raised how the forethought of divorce has regularly come up in discussion with shareholders but often in the context of their personal circumstances rather than from the perspective of the business. The extent of the English Family Court’s wide-ranging powers to make financial orders that require the payment of lump sums or a series of lump sums, the sale or transfer of property, the sale or transfer of shares or pensions, as well as maintenance for one spouse and/or for children is not always fully understood. Business owners are often unaware that all assets will be on the table, not just traditional and/or matrimonial assets – meaning there is no guarantee the business will survive a divorce intact. And many are equally surprised to learn that the Court’s powers also extend to assets outside of this country, encompassing a spouse’s worldwide wealth.
With the likelihood of marital breakdown a real possibility for many couples, our discussions explored how 'love' and 'business' are so closely intertwined. With careful planning, open conversations at an early stage and informed guidance, a family legacy can remain intact even in the event of a break up. Although pre-nuptial agreements are not the natural language of love and in many cases raised in hushed voices, they can be an essential part of pre-wedding planning, especially if the commercial success of a business could be at stake. Sowing the seeds around family governance and having these difficult conversations early with the next generation can save further heartbreak down the line and even create a foundation of open communication for couples before they embark on marriage and life together as future successors of an established family enterprise.
The roundtable discussion centred around our guide, 'A legacy intact. Safeguarding your family business in the event of divorce' which is informed by our experience of the challenges that can occur in family businesses, where relationships are complex and evolving – and naturally carry emotional ties that do not exist in other organisations. The guide is illustrated with practical scenarios and contains guidance coloured by our appreciation of the sensitivity and careful approach needed. More information regarding 'A Legacy Intact' and how to download a copy, can be found here.