The verbal agreement made around the kitchen table, often made in good faith, can quickly escalate into bitter courtroom battles, tearing families apart and leaving legacies in ruins.
This grim reality highlights the importance of succession planning for family businesses, as highlighted by Catherine Sayer, FBA CEO.
“There’s a lot at stake for many people,” says FBA’s Sayer.
“There’s often a sense that succession planning can be done relatively quickly. But the dynamics of succession are never the same. Issues involving families or sharing equity or who works in a business can take years to resolve.”
One example, Margaret McDonald alleged her parents and brother, John, told her the two would jointly inherit the family farm. Alleging the discussion had taken place at a kitchen table in early 1984. In 2018, thirty-four years later, the Victorian Supreme Court dismissed her claim. After an appeal and two years of confidential negotiations within the family, the case was discontinued.
This case highlights the need for clear documentation and the potential emotional and financial load this can take on a family in dispute. Courtroom battles can cost up to $70,000 per day and can take up to 18 months to get to court. Families in dispute could be looking at hundreds of thousands of dollars to receive a final decision.
FBA’s Sayer says: “Early intervention and early planning can help avoid expensive and very draining litigation.”
The best way to preserve familial harmony and to safeguard business legacy is to get started early on developing a strategic succession plan with the support of an accredited advisor that outlines roles, timelines and contingencies.
“Parties advising need to understand the dynamics of a family business,” adds Sayer,
“This is something we focus on at FBA offering all members access to tailored connections to Family Business Accredited Advisors. We also support our members through education courses in planning succession, peer learning opportunities through networking events and our Forum Group Program, as well as our Annual Family Business Conference Asia Pacific, this year being held in Cairns this May.”
Click here to read the full article by Duncan Hughes in The Australian Financial Review.
