“One day, my son, the Empire will all be yours!”
You have to feel sorry for Darth Vader, don’t you? “What?” I hear you cry. “That Dark Lord of the Sith? That Master of Evil? Are you mad!”
But wait. Bear with me.
I’m looking at this as a family business lawyer advising the founder of a business empire on passing on the business to the next generation of the family (well, that and as a kid born in the mid-1970s who is still a little bit excited about a new Star Wars film being released!).
For as we will see, once you strip away the costumes and outlandish names, Mr Vader’s succession issues are not all that far, far away from those our family business team regularly advise our clients on in a galaxy much closer to home.
As anyone who has endured the horrors of the Star Wars prequels knows, Darth Vader is a self-made man. Born into a poor, single-parent family he has, by the Force of his own talents, built a world-beating organisation that now employs thousands of people across multiple territories.
Now, getting older and with his health failing (he sometimes has difficulty breathing), his thoughts are turning towards succession planning.
But is anyone in his family willing or capable enough to take over the Empire? And can they be trusted not to squander the value Darth has (quite literally) given his right-arm to build up over a lifetime?
The young apprentices
Darth always hoped that his son, Luke, would join him in the family business and his skills are unquestionably impressive, most impressive. But when Darth recently broached the subject with him, Luke told him in no uncertain terms that the answer was “No!” and the meeting ended badly.
Then there is Luke’s sister, Leia. If Luke won’t join him, then perhaps she will. Although a bit of a rebel, she has clearly inherited much of her father’s business skills and her own start-up venture has grown rapidly. The problem is her husband, Han. Darth thinks he is a bit of a scoundrel. He has abandoned her before and may do so again. Even if he doesn’t, Darth knows Han is heavily in debt. So anything Leia is given could be at risk of being squandered by Han or lost in any marital breakdown.
But there is also a new hope. Leia and Han’s son, Kylo, is proving to be a real chip off the old block and thinks the world of his grandfather. He is ambitious, keen to take over the family business and clearly has great potential. But he is young and inexperienced and the first major project he was given blew up in spectacular fashion.
So, what are Mr Vader’s options?
Well, lets assume for a moment the above all takes place in England with an English company (sadly, as an English law-firm, we can’t advise on Coruscant or Tatooine law!).
Having some family members who have an interest or talent for the business whilst others don’t is a common problem many business owners face. One way to deal with this can simply be to gift or sell shares to those involved in the business whilst giving the others cash to do their own thing. But this isn’t always possible or practicable, particularly where the business is the family’s main or only significant asset.
One option may be to create different classes of shares to separate ownership from control. Those involved in the business could be given normal voting shares whilst those who aren’t have shares that only entitle them to dividend income and capital growth.
A further option may be to consider splitting up the business and either selling off assets (to generate cash) or placing them into different companies that can then be held by different family members. For example, where there are significant property assets (a Death Star, perhaps?) these could be held in a separate family-owned company that leases them to the main trading company. This can also be used to protect the value of existing assets and separate them from the riskier trading business.
Careful legal planning can also mitigate against divorce and other unexpected family events. Bespoke company Articles together with co-habitation or pre-nuptial agreements could help ensure that family assets don’t end up going to undeserving Han or being used to pay off a rogue spouse’s debts.
Finally, Darth could look at legal structures to help his grandson Kylo have some involvement in the business whilst limiting the damage he can do during his troublesome “emo” phase. This may involve using family trusts or family investment companies to hold shares and assets on his behalf. It could also be combined with tailored employment agreement and incentive schemes to bind in key employees to help mentor the next generation.
More options than you could possible imagine
No two businesses or families are the same, so its important to review all the options with a specialist team of lawyers who can guide you to a bespoke solution.
But where to find such a guide? Who can you turn to?
At this point, the specialist family business lawyer lifts back the hood of their Jedi master’s robes, smiles and says “Hello there.”
Use the (Lupton) Force-ett!