Family Business Solicitors & Lawyers for Advising Business Families

A family business is a complex creature. People say do not put all your eggs in one basket but that is exactly what your founder did when the business turned the dining room table into a boardroom table and you began making other sacrifices so that your family business is the success it is.

Now it is your most precious asset, often representing the majority of your wealth; a legacy for your family. Our specialist family business solicitors will help to ensure it is protected long into the future.
At Lupton Fawcett, we understand this and can help you whatever your concern is. With offices in Leeds, Sheffield and York, Lupton Fawcett has been advising family businesses and their owners across the generations for over 120 years. 80% of our clients have started off as business families.  So whether you are a start-up or a second, third or fourth generation business with a number of shareholders, we have the right adviser to help you.

To speak to a solicitor, get in touch by calling 0333 323 5292 or request a callback by filling in the enquiry form on this page.

How We Can Help

What keeps you awake at night? Do you worry what your family’s legacy will be? Should this include philanthropy? What information your family should have about your family’s overall wealth? Will it change your family for the worst, if they have all the information you have? Who needs income after you die and how should that income be provided? Should the family own the underlying capital that generates the income or is a trust structure a better option?

If you own shares in a family business, who should own shares and when should they receive them? Should it only be family members who work in the business and who should have the voting control on those shares? What are the tax implications? How do you treat all your family fairly, especially if not all of them work in the family business? What if you, or they, fall ill, lose capacity or divorce? What should happen then?

We can advise you on:

  • Succession and other exit options
  • Selling your business
  • Bringing in new management teams
  • Balancing the interests of those working in the business with family members who are not
  • Reorganisations and demergers
  • Buying out shareholders and consolidating diverse inter-generational shareholdings
  • Protecting property and other assets from trading risks
  • Family governance and shareholder agreements
  • Family Constitutions
  • Professionalising the Board and branding the Family Business
  • Nurturing Entrepreneurship
  • Business wills, trusts and lasting powers of attorney for shareholdings
  • Family Investment Companies
  • Family Offices
  • Business and personal tax planning
  • Pre-nuptial agreements and protecting your family business on divorce
  • Charitable giving
  • Director and trustee duties
  • Managing differences
  • Family, shareholder and land disputes
  • Exit recruitment arrangements for family members
  • Farming structures, agricultural land and landed estates

Whether you have a specific question or just need advice on how you deal with the perennial question of your own mortality then please contact Amanda Simmonds.

The Family Business Law Team

We have hand-picked a team of family business advisers, drawn from across our specialist practice areas who are exceptionally experienced in advising families and business people like you. The purpose of our cross-departmental team is not to over-lawyer a transaction; rather, we recognise that as you wear many hats (as a director, shareholder, manager and parent or child) you need a team of experts who can work together to provide joined-up advice across all your business, family and personal matters. We put you and your family at the centre and build the right team and advice around you.

Get in Touch

Lupton Fawcett are a leading personal and commercial law firm in Yorkshire with well-established offices of highly experienced solicitors in Leeds, Sheffield and York.

We provide a personalised service, with sector specialists and extensive resources to ensure we are giving you the best solutions to your problems.

Our Family Business Lawyers act regularly for clients across the United Kingdom including Bradford, Birmingham, Hull, Leeds, Liverpool, London, Manchester, Sheffield, York and Nottingham.

As recognised Corporate Law Solicitors we can support your needs wherever you live in England, Wales, Northern Ireland and Ireland.

Accreditations / Awards

Frequently Asked Questions

How can I give back in a way that works in the context of my family business?

There are a number of ways that your family business can contribute to worthy causes. Donations to existing charities is one way of approaching this. Alternatively, if you prefer a greater deal of control over the way in which the relevant funds will be applied or if you have a specific cause that you wish to support in a way that is not already catered for by existing charities, then you could consider setting up a charitable foundation. While foundations need to be established on an independent basis to your business they can use the business name (or part of it) and can receive donations from the business, its managers, employees and customers. Some of the positive impacts that can arise by establishing a charitable foundation include: (i) a focused and ring-fenced method of meeting your sense of social responsibility; (ii) where managers and employees have been active members of the foundation, higher managerial and employee engagement and improved relations between owners, managers and employees; and (iii) more positive public relations.

How can I both benefit a charitable cause and give the younger members of my family the opportunity to increase their managerial experience?

As we have noted above setting up a charitable foundation can be a positive development for many family businesses. An additional benefit to those noted above is the fact that regardless of whether a family member is a member of your family business, setting up a charitable foundation is a great way of giving the younger members of your family a chance to develop a range of skills (such as financial skills, management skills, working within a regulated environment, working with the public) that will be directly beneficial to any future career that they go on to follow.

What issues ordinarily arise when considering a family business in a divorce context?

The following issues generally arise in respect of a private company:

  • Is there a market for the shares or any of the assets of the companies?
  • If the shares or assets of the company were going to be sold, what would be the strategy that should be adopted in respect of such sales?
  • How should the business, and in particular the holding company, be valued, and if part of the valuation should be on an earnings basis what is the correct approach to determining the maintainable profits and what is the range of appropriate P/E ratios?
  • How could money be raised within the business and paid out to the shareholders or directors?  This would almost inevitably require an assessment of the distributable profits, and an assessment of the tax consequences
  • What would be the likely effects on the business and its valuation if monies were raised and paid out?

Do assets held by the family company also belong to a spouse for divorce purposes?

A limited company has a separate legal personality.  The shareholders do not own any interest in company property.

The 2013 case of Prest v Petrodel Resources established that assets held by a company cannot be regarded as belonging to a party to a marriage simply because (s)he is the sole shareholder; the party’s interest is in the shareholding.

However, it may be appropriate to consider whether the company assets are truly the assets of the company or whether the company might be regarded as holding property on trust for one of the parties to the marriage in the particular circumstances of the case.  In those circumstances not only can the property be treated as property to which the party is entitled, but orders can be made directly in respect of the property.  It is not uncommon for a matrimonial home to be a company asset.

What are the factors a court will take into consideration when distributing assets of the marriage, including the family business, to achieve fairness between spouses?

  • The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
  • the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
  • the standard of living enjoyed by the family before the breakdown of the marriage;
  • the age of each party to the marriage and the duration of the marriage;
  • any physical or mental disability of either of the parties to the marriage;
  • the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
  • the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
  • in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

Should a shareholders’ agreement be implemented and articles of association amended to restrict the subsequent transfer of shares?

Yes.  If a family company wants to restrict who can become a shareholder in the company, the family company’s articles of association should be amended and a shareholders’ agreement should be adopted that restricts who can hold shares and how shares can be transferred. For example, there may be a provision to state that only “family members” (as defined within the articles/shareholders’ agreement) can hold shares in the company, or that if a shareholder wishes to transfer shares then they must give the other shareholders (who will be family members) first refusal to buy them before they are transferred to someone who is not a family member.  There can also be a provision that shares can be put into a trust by a family for other family members or for their children or grandchildren.  A shareholders’ agreement can also cover other areas such as restricting certain actions that the company can take without the agreement of named family members or a certain percentage of shareholders.

What if I lose mental capacity?

It is a sad fact of life that we are all living longer and that some of us will lose mental capacity.  If you are the director of a family company your directorship will come to an end if you lose mental capacity. However, you will still retain your shares but who will exercise the voting control over this valuable asset?  It is possible to leave a Lasting Power of Attorney which will give an Attorney power to exercise powers over your assets if you lose mental capacity.  However, if you have a valuable asset such as shares in a family company, you may not wish to have the same person who is dealing with your day to day financial affairs, exercising the voting control on a substantial shareholding.  It is possible to have different attorneys to exercise power over different assets or alternatively you can have a separate business LPA to deal with your business affairs.  The important thing is that you seek appropriate advice and consider what would happen if you lose mental capacity, in the same way as you consider what would happen to your assets if you should die.

Should I make a Lifetime Trust?

The advantage of a Lifetime Trust over an outright gift is that the trustees retain control over the assets, therefore depending on when the trust is made, if one of your children divorces or pre-deceases you, assets will not go outside your immediate family’s control.  The advantage of creating a trust is, normally, trusts incur an upfront tax charge of 20% when they are created but if your shares qualify for inheritance tax business property relief then you can put as many shares in trust as you like without paying the upfront tax charge.   The downside of creating a trust is that you can lose out on entrepreneur’s relief and therefore if you are planning to sell your company, you need to put the trust in place at least a year before any potential sale.  The key in this is taking the appropriate tax advice and this is something we are always happy to help you with.

Do I need an Employment Contract for the Family Members who work in the business?

Sometimes there is an assumption if you are employing a family member that you don’t need a service contract.  However disputes, even in the best of families, can arise and it is imperative that a person’s terms of employment are formally recorded and therefore we would recommend employment contracts or director’s service contracts in every case.

There is another issue that can arise if you are creating lifetime gifts of your family company’s shares, as HMRC can argue that the voting control on the shares in the trust is being used to secure your remuneration and therefore you have not made an outright gift because you are still retaining a benefit from the shares.  If HMRC raises this argument the seven-year clock which you are hoping to set running by creating the trust does not, in fact, start running.  Therefore if family members are creating trusts and are thinking of being trustees, we always advise that they ensure that a Director’s Service Contract is in place to secure their remuneration before the trust is created.

What is a Family Constitution and do I need one?

A family constitution, or charter, or protocol, is a formal document that sets out the rights, values, responsibilities and rules applying to stakeholders in the family business and provides plans to deal with matters which may arise in the course of the family business’s life.  A constitution serves as a short aspirational blueprint of the long-term goals of the business, its core principles, its vision and strategies for the future.  The document will state what will happen if an unexpected event occurs in the family, such as a  family member falling ill,  a divorce or a substantial creditor claim against the business. Although family constitutions are generally not legally binding, they are said to be emotionally binding and families who discuss what will happen if the family is hit by an unexpected event will be better equipped to deal with that event. A family constitution can also provide for an informal and internal dispute resolution process to help reduce costs and avoid publicity if a dispute arises in the family.

It is important that when the time comes to draft the constitution the family has a clear idea of the goals of the business and the roles of the family members within that business and that it is regularly reviewed to check for compliance and whether amendments are needed, for example, when the next generation enters the business.

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