Keeping it in the family...or not

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Published: 25 Oct 2016

Mr and Mrs Limited

In the SME market, ownership of a company is normally held by a single shareholder or by two shareholders as husband and wife or two persons with complimentary skills working together. So the decision to sell the Company at the appropriate time is reasonably straightforward. In the case of a single shareholder the decision can be unilateral after taking into account the nearest and dearest.

Family and partners

But it is not necessarily the same for two or more shareholders. There may be different expectations of the shareholders involved due to age and aspirations. So it is important to plan strategically for this eventuality well in advance. 

That means the directors/shareholders should sit around the table to discuss all available options and how all of them can be accommodated. There may be no perfect answer, but planning ahead will enable all shareholders involved to agree a realistic solution.

Family and children

When the ownership of the company becomes generational, then aspirations may diverge even further. The younger generation may not be interested in carrying on the family business at all and there is no reason why they should. The important point is to recognise this early on so that a buyer can be found soon enough before the company management weakens too much. Early action will enable the company to be sold for a satisfactory price as opposed to putting it into liquidation for very little return to the shareholders.

“So what about the money?” I hear you say…

Every scenario is different as this example demonstrates.

I was recently part of a team advising the shareholder / directors on the sale of their family company. One shareholder, the mother who started the business with her late husband in the 70’s, was not primarily interested in seeking a great amount of financial compensation for the sale of her shareholding.

The solution that worked best for her and those that now own the company, is that she remains to help out the new owners, retaining her skills and knowledge, and she is able to continue with what she started all those years ago with her husband.

Family Business Exit steps

If you do not yet have a succession plan or exit strategy in place and would like to start discussing the options, please call David Cane of Sundial Tax & Finance Ltd on 07749 080 806 or email David