Good morning,

We hope you enjoy the fourth ezine from FBS.  This month, we discuss the topic of limiting ownership in family businesses and ask whether or not spouses should be welcomed into the equation.  We also explore the implications of divorce upon family businesses, with emphasis on safeguarding the business in that event. 

If there is anything we can help you with, you are welcome to contact us here or call us on 0141 222 2820. 

Very best regards,
The FBS Team

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Here’s an interesting topic for a family discussion.  Some families limit ownership to bloodline descendants of a founder, while others want spouses to be included as owners.  What are the arguments on each side?

In favour of spouses becoming shareholders:

• The shares could help provide financial security for a spouse and his or her nuclear family, especially where the shares represent a significant part of that family’s wealth and income.

• Allowing spouses to own shares communicates a strong signal about spouses being part of the family and the business.

• The alternative is that spouses might feel excluded, which could dilute the “glue” that bonds the family to each other and to their shared investment in the business.

• Spouses are parents of the next generation and if they are shareholders they are more likely to pass on positive messages about the business to their children.

• In the event of marital separation or divorce from a family member, rules can be put in place to provide that any shares held by a spouse should automatically be gifted back to the bloodline family member.

• Permitting the transfer of shares to spouses opens up options for more tax efficient planning in respect of income and capital.

Read the full article here.

In association with the Scottish Family Business Association, Strathclyde Business School is presenting a series of Family Enterprise Lectures. The next lecture will be given by Jacqui Walker, a non-executive director of Walkers Shortbread and a member of the next generation of a family that has built one of Scotland’s most successful companies. 

Date: Monday 25 November at 2.45pm

Location: The Court Senate, Collins Building, 22 Richmond Street, Glasgow

To register for this event, please email the corporate events team or call 0141 548 2245.

Unfortunately one in two marriages fail. What are the consequences if an owner of a family business separates or divorces? Is there a way to protect the family business which has been in the family for a number of years.

What is the law on divorce?

On separation/divorce, matrimonial property must be shared. Unless there is an agreement in place, or there are special circumstances the default position is that any matrimonial property is shared equally.

Matrimonial property is all property owned by a couple (individually or jointly) at the date they separate and which they have acquired during the marriage, other than property which has been gifted to them by a third party or inherited.

So property acquired before the marriage, or property gifted or inherited during the marriage, will not be matrimonial property.
The law encourages a clean break settlement and will take account of an individual’s ability to pay.  Some assets can be split, others can be sold with the proceeds being shared; but some assets can’t be split or sold with the result that someone has to fund a large capital payout.

How can the family business be protected from divorce?

In many cases shares in a family business will pass to the next generation by way of gift during the lifetime of the seniors, or the next generation will inherit the business on the death of the seniors. In these cases the family business will not be matrimonial property and will not therefore be included in the pot of assets to be shared on separation or divorce.

However, if the family business is gifted to the next generation it is vital that the gift is properly documented, otherwise there is a risk that the family business will be included as matrimonial property.

Read the full article here.

FBS was established in 1996 by two of the world’s leading practitioners in the field of family business consulting.

FBS has developed a consulting service that is unique to FBS and that enables FBS to provide help to families in a consistent and cost effective way. It is tried and tested, and more importantly, provides a safe framework within which families can discuss and resolve the issues they face.

This month -

Susan Hoyle and George Stevenson are guest/expert speakers on Succession Planning at the Thrive Round Table Discussion meetings in Glasgow (October 28) and Edinburgh (November 11).

The two are also speaking at the Society of Trust & Estate Practitioners Annual Conference in Dundee on 15 November on the subject of Succession Planning.

Liam Entwistle is speaking at the Royal Faculty of Procurators in Glasgow on 14 November on “How to get more from, and give more to, your family business clients”.

Meet the FBS team here

Contact FBS here or call us on 0141 222 2820 to arrange a meeting to discuss your requirements.