Deadlock Forces Sale When Family Inherits Business

When a family business is handed down and ownership is split between two or more members of the next generation, the result can all too often be discord. Normally, this can be resolved by one party buying out the other, but when this does not occur, the result can be a disaster, as a recent case shows.

It involved a family company owned by a man who died in 2001, leaving a controlling interest in the company to his children by way of a trust. Gradually, one of the children took over running the business and brought in her husband (an accountant) to help, although all three children were directors.

Her two younger sisters became increasingly disaffected by the arrangement. Things deteriorated to the extent that the two factions held ‘rival’ board meetings and refused to recognise the legitimacy of the ‘other side’s’ meetings.

Considering the impasse to be insoluble and the company no longer governable, the two sisters brought a petition seeking to have the company wound up. The court granted their application.

The succession arrangements for a family business often need to be approached with delicacy and a lot of forethought. If difficulties are anticipated, there are a number of means by which the need for long and expensive litigation can be avoided: for example, the creation of a shareholders’ agreement with appropriate terms for dealing with shareholder deadlock.

If you are considering passing your business on to your family, we can advise you how to avoid the potential pitfalls. In general, the earlier thought is given to the relevant issues, the better.

We are here to help you and with our highly competitive fixed fees can see the whole matter through at affordable prices with complete confidentiality and you will find we are very good at what we do.

We are not doctors, but we know that the impact of our legal work can be as important and life changing as that of a surgeon.

We are informal and approachable but also deadly serious about helping you, just like a top surgeon.

At Hylton-Potts we operate a free 24 hour helpline by email on [email protected] or in office hours call 0207 381811.

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