Should we have directors from outside the family?

You want to ensure that your board of directors has the skills and experience needed to run the business effectively and to meet their legal obligations. This includes having a board of directors which keeps up to date and is open to new ideas.

Achieving this with a board of directors composed entirely of family members is almost impossible. Family businesses often look for several non-family directors:

• Someone with legal experience to deal with legal and administrative matters, such as filings at Companies House, premises, insurances, trade marks and domain names, etc.
• A qualified accountant to act as finance director.
• One or more individuals with industry experience to act as non-executive directors. This may include someone who acts as non-executive chairman.

It is worth remembering that having external directors does not mean that you give up control of your business. You will, however, want to ensure that you are in a position to easily remove external directors should you feel the need to do so. You will therefore want to ensure that external directors have suitable service contracts, and that you (or your family together) retain a majority at both board and general (shareholder) meetings.

Related Resources

in the Muckle LLP Resource Centre

• What are the most common problems with family businesses?
• How can we minimise the risk of disputes over the running of the business?
• 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?