Posted on 23.9.20 by Christian Mancier
There is still a (mis)perception that Family Business = small business. Whilst many of the circa 6 million family firms in the UK may well be at the smaller end of the scale, those 6 million Family Businesses account for circa 80% of all private firms, employ over 12 million people and account for roughly one-quarter of the UK’s GDP. At the other end of the scale, the largest 20 UK Family Businesses (including names such as Dyson, JCB, European Metal Recycling and the Pentland Group) account for nearly £50 billion in turnover, a figure that is anything but small.
My first experience of family businesses came from a matter where a third-generation family business was owned predominantly by the grandfather (1st generation) with his son (2nd generation) and grandson (3rd generation) owning the balance between them. Grandfather had long retired, the son was approaching retirement and the grandson was the focal point running the business and driving it forward.
Grandfather sadly passed away and to everyone’s shock when his Last Will and Testament was read he had left his entire shareholding in the company to a distant relative. This relative had never been involved with the business and was from a different side of the family, where, it was fair to say, there was not much love lost between the different sides of the family.
On reviewing the company’s articles of association, the articles of association contained specific provisions about what happened to the shares of a shareholder who passes away which went against the provisions of grandfather’s Will as to where he had left his shares following his death. This created a deadlock position between grandfather’s Will (which said his shares would be handled one way) and the company’s constitutional documentation (which said something else should happen to his shares).
Resolving this deadlock took well over 12 months, a not insignificant amount of legal fees (on both sides) and involved son and grandson having to borrow meaningful amounts of money (personally and in the name of the business) to fund a deal to buy out the distant relative. All of this was accompanied by the stress of the situation between the family and trying to keep the business running and growing whilst all this was playing out in the background.
At the time it struck me that a fairly horrendous situation for all concerned could have been avoided by grandfather, son and grandson speaking, having a conversation, planning for the future and having documentation on both sides (i.e. a personal Will and company constitutional documentation) which was not only consistent across the board but was consistent with the conversation. Through all my dealings with Family Businesses, the common theme that comes up repeatedly is how difficult it is to start that conversation…..and, more often than not, once that conversation has started it proves to be a cathartic experience for all concerned.
Since that experience, well over 15 years ago, I have had the pleasure of hearing so many amazing stories, good and bad, from Family Businesses up and down the country at events, seminars, conferences and, more recently in light of COVID, online. These stories have covered everything from runaway success stories, mind-blowing statistics, challenging times, difficult decisions, fallings out, U-turns, criminal activity and even one son who had his dad’s office dismantled whilst he was out of the office on a long weekend!
Above all, it is the stories that fascinate me the most about Family Businesses as every Family Business has an amazing story to tell and every story is different depending on the business and the individuals and personalities involved.
Over recent years my wife has become involved as the second generation of what is now a Family Business and it has been fascinating to actually live and breathe a Family Business from the inside. I now understand how everyone mucks in, (I often find myself [with the kids – a possible third generation?] helping out with bits of DIY in the business premises over the weekend), the dynamics between generations and how quickly that conversation to see how the kids went on at school that day can turn instantly to discussing whether that invoice got sent to XYZ or some event that happened earlier that day at work.
It is that passion that flows through the dedicated Family Business team here at Gorvins and here at Gorvins we are proud to support Family Businesses up and down the country on National Family Business Day 2020.
Corporate Partner and Head of the Family Business Team at Gorvins Solicitors