Australia since the 1950’s has seen some extraordinary changes in the circumstances of many families. From the baby boomer generation onwards, the combination of almost uninterrupted economic growth; steadily rising real property values, and the enterprise of many family businesses has seen real gains in personal wealth.
Society has also become more complex in how we deal with that wealth. Investments; shares; superannuation; forms of borrowing; new forms of holding wealth combined with increasing regulation have all contributed to the complexity. With that complexity comes the need for forward planning.
How people do business these days increasingly looks at the structure of that business and its management and structure; not just how it operates on a day to day basis. The structure may include a holding company; an operating company; family trusts; land held in a self managed superannuation fund; and the involvement of family members in that business may be any of direct employment; independent contractors; shareholders or beneficiaries.
Initially the need for some structures may be tax driven. As a business grows there is a need to stream the wealth generated back to the family whilst protecting that wealth from risk in the business. The structures that are set up acquire a longevity outside the personalities who established the business in the first place.
Bring key people through a business, whether family member or others, becomes on ongoing issue. Rarely can a person’s will address that issue. Ambition is rarely met through telling someone to “Wait”. The need is for forward planning that looks at a structure, and sees how those key people might be gradually engaged in it, moving from working in the business; to management and then to an equity position.
The interesting thing is that although there is complexity, most people have some grasp of it. They develop a sophisticated approach to how they engage in the business and have questions that need direct answers. They also have an appreciation of the risks in business- not just from demand or competition, but with relationship issues within a family and because of the breakdown of relationships. These further issues may not be totally avoidable; but they can be planned for to some extent and structures even put in place for dispute resolution if there is a risk of them.
Anticipating disputes also means looking at minimising the risk of conflict at the management level. The term “corporate governance” is often used to describe it. Shareholder’s agreements; constitutions; family agreements; even structured family meetings are all aspects.
Again, it all seems complex. However, the attitude should be that succession planning is a normal if not integral part of business planning. In any family business, the question is how that control is given to the next generation and how the change is managed.
For further information to discuss your specific business or private requirements contact Andrew Pickles, Director
