Finding the right exit: Future Planning
In the final part of our series looking at exiting a family business we look at the importance of future planning
Future planning is vitally important to the wellbeing of any business and as such it is imperative that the planning process continues after any exit and takeover.
Apart from the obvious reasons of planning for the future in terms of strategy and vision, it is important that new owners, especially if a family business has been divided between two or more siblings or other relatives, understands each other individuals’ plans.
When taking over a business, everyone can be busy and there may be excitement of fulfilling a lifetime’s destiny to head up the family venture. So, all is rosy and the new family owners cannot see past the upward potential and future wealth.
However, there may already be looming problems, particularly if those owners have vastly different views on how to achieve those goals or vastly different attitudes on the commitment needed to manage the business and how to set appropriate remuneration,
There may be age gaps and consequent different views as to when to sell the business. One sibling may want to pass their share on to their own children while the other wants to sell up and see the world.
These may not have ever been issues when mum and dad controlled the business because they had the same goals and ideas and sang from the same hymn sheet.
Add the siblings’ spouses or partners into the mix and you could have vastly differing viewpoints and further problems affecting the wellbeing of the venture.
All this once again highlights the importance of good communication throughout the business as well as the role of a Shareholders Agreement, something which may not have been thought needed before.
It is a subject we’ve touched on before in this series of articles. It is important from day one to make sure everyone is clear about their expectations and requirements and how things will be handled if situations change.
Have a Shareholders Agreement drawn up by a solicitor specialising in business matters. Advice on the content and implications is needed along with guidance on the type of issues to be incorporated into an agreement.
Put simply it is a legally binding private contract between two or more shareholders that governs how a business is managed and run, but more importantly, what should happen if things go wrong.
A well put together agreement should include exit strategies in the event that one – or several – shareholders can no longer be in business together.
Other issues it can cover include how many directors there can be and how are they appointed or removed, what shares can be held and by whom, how shares are valued when sold or acquired and how to deal with shareholder disputes and minority protection.
• To discuss any issues raised in this series of articles please contact me on 01772 430000
