The Scottish Family Business Association exists to support, nurture and help develop the full potential of all our Scottish family businesses. Research, expertise and experience from across the globe show that by adopting specific best practices family businesses can overcome inherent challenges and flourish both as businesses and as families.
Although it is not always recognised family businesses already dominate the Scottish economy, accounting for 69% of all businesses in Scotland and create around 45% of the GDP of our country. Yet despite these facts 57% of family firms have no defined plans for succession and most conflicts in family firms arise from family issues such as succession or family relationships. Indeed most family businesses fail for family rather than business reasons. Only 33% of family businesses survive into the second generation with only 9% surviving into the third generation.
So if failure of family firms is predominately due to family reasons then concerns about succession planning, Wills , Powers of Attorney and Pre-nuptial and Co-habitation Agreements can hold equal sway with the sustained success of a family business as any application of commercial law.
There are three matters to consider.
The first is succession planning. If someone dies without a Will in Scotland their estate is administered according to the law of intestacy which means that rather than the business passing in a planned way from one sibling or generation to another, the future of the business will be decided by the law which in some cases may lead to very young children or distant relatives inheriting control of the family business.
Secondly to have a Power of Attorney is very important. If a business owner or partner cannot work as a result of serious illness or accident then a Power of Attorney will help ensure that the business can carry on as usual. In fact a Power of Attorney can be pivotal to the continuity of the family business and it should be noted are also appropriate for even the youngest and fittest of business owners.
Lastly in family firms decisions around corporate structure, share issue and personnel are often based on commercial or tax reasons and it is easy to overlook the consequences of relationship breakdowns for the business. Pre-nuptial contracts and cohabitation agreements can ring fence a family business from being included in divorce or separation settlements therefore safeguarding the future of the business.
Why leave your family firm exposed if certain events or misfortunes occur. Far better to plan the future of your business and have a Will, Power of Attorney or Prenuptial or Cohabitation Agreement in place. If I can help please contact me, Ross Leatham, by emailing firstname.lastname@example.org or by calling 0141 552 3422