Attending the recent Enduring Family Business event jointly hosted by Cork Chamber and the Cork branch of the Chartered Accountants of Ireland I was struck by some of the statistics revealed by Brian O’Brien of PWC. PWC’s 2016 Family Business survey makes for fascinating reading for those of us providing professional services to family businesses.
74% of the businesses surveyed had the next generation employed in the business thus highlighting the importance of governance in family businesses and it’s role in avoiding dangerous and unnecessary conflict. Having governance structures in place which are designed specifically for your business protects against misunderstandings that could take precious time and energy to resolve and could impact negatively on your family beyond the business.
By governance structures what I’m talking about is ensuring you have the following in place:-
- Employment contracts – you are legally obliged as an employer to provide written terms and conditions of employment, even when that employee is also a family member;
- Workplace policies to include grievance and disciplinary policies;
- Shareholders’ agreements;
- Family constitution – this can be used instead of a shareholders’ agreement. This document should detail such matters as policies for decision making; conflict resolution; what will happen to the business in the event of the sudden death or incapacity of one of the family members;
- Enduring power of attorney – when sudden illness or injury renders someone incapable of making decisions for themselves (even temporarily) who will have the legal authority to run the business, sign the contracts, write the cheques?
Governance for your family business is a crucial factor in ensuring the success and longevity of your business. Unresolved conflict within family businesses which becomes public can damage the very fabric of the business and it’s reputation, let alone the damage it can do to those important family relationships.
It is never too soon to put governance in place in your family business. Don’t wait until misunderstandings arise or the unexpected serious illness or death of a family member which throws your business into chaos.
At Douglas Law we encourage all of our business clients to be proactive and protect the businesses and families they work so hard for by putting in place the necessary structures to deal with all possible eventualities. Investing in this now will pay big dividends in the long run – ultimately saving you money, time, energy, worry and most importantly, your family relationships.
If you would like any further information or would like to meet me to discuss these issues please do not hesitate to contact me Gráinne O’Donovan, Solicitor at firstname.lastname@example.org or on (021) 489 7256.