The on-screen dramas of Succession and the real-life power dynamics of the Murdoch empire are riveting but don't let them distract you from more relevant issues around succession planning
For spectators, the best aspects of succession planning are power struggles and sibling rivalry. For most family businesses, there’s a much more pressing issue: the risk that your family business could be put in the hands of people completely unsuited to the task.
Sounds melodramatic? Far from it. It’s an everyday consequence of Scotland’s laws relating to inheritance and who can look after someone’s affairs if they’re incapacitated. The fallout for families can be devastating.
What it comes down to is that simple legal arrangements around Wills and Powers of Attorney can be as important to the survival and success of a family business as the commercial law side.
We’ll explain why.
Who inherits
If someone dies without a Will in Scotland, their estate is administered according to the intestacy laws that determine who inherits what – which could include their share of a business. Rather than the business passing in a planned way to, say, a sibling or partner, the law could hand their share to a young child or a relative they hardly know.
Such situations can be avoided by making a Will. When doing this, the personal and the commercial elements should be considered holistically – for example, the provisions of the Will and the business’s articles of association or partnership agreements must align.
Who takes over in a crisis
Another important element of succession planning is a Power of Attorney (PoA), often viewed (wrongly) as relevant only to the elderly or infirm, and to personal issues around welfare and finances.
A Power of Attorney is also a business tool, setting out who runs the business if an owner cannot work through serious illness or accident. Without such an agreement in place, the business could be paralysed, with family members or other staff unable to access bank accounts or implement any decisions.
“Simple legal arrangements around Wills and Powers of Attorney can be as important to the survival and success of a family business as the commercial law side.”
Importantly, people don’t have to appoint the same attorneys for their business and their personal affairs, so it’s useful to consider who’s best placed to make a success of the business in their absence. This could be a family member but it doesn’t have to be.
In addition, as with making a Will, the PoA should be compatible with other governance elements, such as articles of association or partnership agreements.
If you are a business owner, it is crucial that you speak with your solicitor to protect both your business and personal interests. We can provide you with advice tailored to your particular circumstances and ensure that you have the appropriate legal documents to put safeguards in place, should the worst happen.
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