Family businesses—ownership governance
Produced in partnership with Ken McCracken
Family businesses—ownership governance

The following Private Client practice note produced in partnership with Ken McCracken provides comprehensive and up to date legal information covering:

  • Family businesses—ownership governance
  • Value-out owners or custodians?
  • Dividends
  • Bloodline or spouses?
  • Working and non-working owners
  • Class rights
  • Consistent personal planning
  • Control and commitment
  • Family branches
  • The use of trusts
  • More...

The examples given in this Practice Note are based on a UK company that is privately owned but the same issues arise for families who own other types of assets or whose companies are in other jurisdictions.

Ownership governance for a family-owned business involves a family answering fundamental questions about their attitudes to ownership, which can then be recorded in legal agreements. For further information on the mechanics of formalising a family-owned business, see Practice Note: Formalising the family business: the advantages a formal structure can bring.

Value-out owners or custodians?

There is a fundamental difference in attitude between two types of owners in a family business.

  1. the commitment of value-out owners depends on receiving a satisfactory financial return on investment in the short to medium term. If this return is not forthcoming, then like any other rational investor, the value-out owner will want to sell their shares and invest elsewhere, in pursuit of a better return

  2. custodians (or stewards), in contrast, are concerned with how well the family’s assets have been carefully grown over a longer period, often a generation of the family. The custodian is more likely to accept trade-offs between personal financial gains and other types of 'return', for example, creating or maintaining a legacy of family ownership to pass to the next generation or looking after the wider interests of a group of

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