Standard corporate advice often ignores the emotional dynamics of working with relatives. A specialist family business solicitor understands the unique tensions involved in hiring family members, succession, and ownership. We ensure the legal structures we build can withstand emotional pressure, ensuring practical solutions for your specific family dynamic.
A Family Charter (or Constitution) is a document that sets out the family’s vision and values regarding the business. It covers policies such as the employment of family members, conduct, education of the next generation, and retirement ages. While not usually legally binding, it acts as a moral compass to guide decision-making and manage expectations.
Divorce can be catastrophic if a spouse claims a share of the company assets. We strongly recommend Pre-Nuptial or Post-Nuptial Agreements for family members involved in the business and/or bespoke clause sin the Articles of Association or a Shareholders’ Agreement to address this potential issue. These agreements help ring-fence shares, ensuring that the business assets are not considered matrimonial property to be divided.
Without a proper agreement, shares could pass to a beneficiary (like a spouse or distant relative) who has no interest in, or skill in, running the business. We help draft Cross-Option Agreements, often backed by life insurance. This ensures the remaining shareholders have the funds and the legal right to buy back the deceased’s shares, keeping control within the intended group.
BPR is a valuable tax relief that can reduce the value of a business or its assets when calculating Inheritance Tax (IHT). Previously this would provide 100% relief meaning the shares in a family business could be passed on tax free, however, recent changes to the rules around IHT mean that the value of shares in family businesses are now taken into account for IHT purposes with the relief reduced to 50%. This is a significant change to the family business landscape and needs to be panned in advance to avoids liquidity issues when it comes to paying IHT after the passing of a shareholder. However, the rules are complex and depend on the nature of your trading. We work with your accountants to ensure your business structure is as IHT efficient as possible.
Generally, you cannot force a shareholder to sell unless there is a specific provision in the Shareholders’ Agreement or Articles of Association (such as “drag-along” rights or “compulsory transfer” provisions triggered by certain events such as bankruptcy or cessation of employment). This is why drafting a robust Shareholders’ Agreement before a dispute arises is vital. If no agreement exists, we can mediate to negotiate a fair exit strategy.
This is a common issue known as the “glass ceiling.” We can help you draft incentive schemes, such as Enterprise Management Incentives (EMI) or phantom share schemes, to reward key non-family management. We also advise on governance structures that ensure promotions are based on merit, not just DNA, helping you retain top talent.
An EOT is a way of transferring ownership of the business to employees indirectly. It is becoming a popular exit route for family business owners who do not have a family successor but want to protect the legacy, ethos, culture and workforce of the company. We can advise if this tax-efficient model is suitable for your business.
