How can we minimise the risk of disputes over the running of the business?
As with any private company, you should have a shareholders' agreement (see question 6). This (together with the company's memorandum and articles of association) establishes the ground rules for how the business will be run. The process of preparing the agreement allows you to talk over major issues and agree how they will be approached. (If your business trades as a partnership, you can achieve the same effect with a partnership agreement.)You may also want to have some form of 'family charter'. Preparing this can be a good way of talking over issues that do not fit as comfortably within the more formal framework of a shareholders' agreement. For example, discussions can include talking about what family members expect from each other. The family charter can also involve members of the family who do not take an active role in the business or who do not own shares in it. Regularly reviewing the family charter can be a part of promoting good communication between family members.
Two general approaches often seem to reduce the likelihood and intensity of disputes:
- Family members who work in the business are treated without favouritism.
- The family makes a conscious effort to keep some distance between 'business' and their private lives.
Related Resources
in the Legal Information Centre
- What are the most common problems with family businesses?
- What can I do if family members who work for the business don't get on well together?
- What can be done if a family shareholder is using their shares as a weapon in a family feud?
- Can we stop a family shareholder giving shares to the 'black sheep' of the family?
