In Tatler, Partner and Head of Private Wealth, Hayden Bailey looks at how successful family business owners ensure that the transition of the privately owned enterprise from generation to generation is effective and efficient. He considers what happens when a child is hesitant to take over a family business and would rather be on the side-lines; how families should best prepare to hand the baton over and the legal arrangements that need to be in place for successful succession.

Hayden Bailey, Partner and Head of Private Client & Tax at Boodle Hatfield tells Tatler: ‘With a proper governance framework in place, it is common that later generations may not need to be involved in the day to day operating business and pursue other career paths. The family representatives may instead sit as members of a higher group board that considers long term strategy and asset diversification. It is often the case that the founder generation is on 'the factory floor' with future generations more involved in capital allocation and the governance of the operating businesses.’

‘If family members do not wish to be involved in the governance at all, then trusts can offer a very helpful structure. In this scenario the trustees will hold the shares in the business for the family and must act in the family's best interests. In large multi-generational business families a 'talent academy' will be developed alongside a family constitution to identify which family can or should work in the business and what qualification or external experience is required.’

Bailey tells Tatler: ‘Every family business has its own dynamics and there isn’t a one size fits all approach when it comes to navigating the legal terrain with multi-generational families and succession. However it is likely that a business family will want to consider trust structures that can strategically manage the share ownership, a shareholders agreement that can manage the management and decision making and a family council to manage the family’s expectations on performance and value extraction'.

Read the full article in Tatler here.