Facilitating a Family Constitution
This second generation family business wanted to ensure a smooth handover to the third generation, whilst retaining their involvement in the business for the time being. To reduce the potential for conflict they felt that a family constitution would support them over the long term.
Approach – We met with all the family members to explain the journey that they would undertake and our role in facilitating the preparation of the family constitution. Each family member then had the opportunity to talk through their own values and vision for the business with a member of Mazars’ team so that their views were considered. This process involved shareholders, non-shareholders, directors and non-working family members. Building upon the consensus of the family, we drafted a constitution that the family subsequently met to discuss, validate and ultimately sign up to.
Result – All family members felt involved and committed to the business. Methods of communication were laid out so that they could all understand the activities of the business, the family’s engagement with the business and their role in its continuing success. Living the terms of the constitution has helped improve the business’ performance, ensures that the family properly addresses any changes that are necessary and maintains family harmony.
Understanding Fairness in a Family
This first and second generation business was looking to ensure that the family assets and family business were fairly transferred to the second generation, comprising two brothers and a younger sister. The brothers both worked in the business, yet whilst the younger was the Managing Director, his brother was a labourer in the distribution warehouse.
Approach – We worked with the mother and father (the founders of the business) to understand their assets and establish their needs in retirement, in order to ensure that only surplus assets were considered alongside the business. Then we established the need for control over the business, allocation of shares and the rewards for the work input of both brothers. The simple division of assets initially proposed by the parents was not regarded as fair by the younger brother.
Result – The parents retained what they needed, the Managing Director kept sufficient control of the business to enable appropriate decision making, and his brother retained his position. The non-business assets were appropriately shared between the siblings and all agreed that the split was a fair division.
Classic Succession Planning
This established Yorkshire printing business required help with succession planning. The business had been set up by two brothers and one was keen to exit the business.
Approach - We worked with both brothers to structure a deal that saw one retire from the business to be replaced by his two children. This process produced a natural succession plan for the remaining brother and we are currently working with him on his exit plan.
Results - Our clients have managed to achieve all their aims through a smooth transition that has enabled them to protect their business. This has enabled them to hand the business over to the next generation and achieve the financial reward they were looking for in the most tax efficient manner.