FAMILY BUSINESS

Disputes In Family BusinessesPaper 010-010

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1. Mixing Family And Business

• Distinguish between family and business

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2. Generation Gaps

• Can threaten the survival of a successful family business

• “Blood is thicker than water”• Do not need “formal” control systems• Family conflicts are fairly prevalent• High failure rate of small businesses• Necessary to agree to a formal structure

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3. Major Crisis Points In A Family Business

• Marriage breakups• Death or permanent disablement of a

principal• Bankruptcy• Retirement• Partnership/Shareholder disputes• Transferring control to the next generation

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4. Communication

• Familiarity can mean that a lot is “assumed”

• Formal communication mechanisms:– Regular Meetings– Family Retreats– Family Conference

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4. Communication cont'd....

• Documents needed:– Business Plan– Succession Plan– Responsibility Chart– Estate Planning

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5. Settling Disputes

• Outsiders or independent persons• Establish “dispute mechanisms”• Pre-planning will contribute to avoidance

of disputes• The items to be considered:

– Recruitment of employees– Job descriptions– Regular appraisals of performance

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5. Settling Disputes cont'd....

– Training– Outside business involvement– Professional development– Regular family meetings– Business Plan– Succession Plan

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5. Settling Disputes cont'd....

– Review of salaries based on actual performance

– Estate planning– Sale of the business– Selling the business to the next generation– Retirement funding