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We have, over many years, been advising family-owned businesses on estate and succession planning, the inter-generational movement of wealth, governance and a host of other pertinent issues including, family business remuneration challenges. It has been and continues to be an intriguing journey for us, having to consider cultural and religious sensitivities, highly driven patriarchs, entitlement culture, generational differences in terms of vision and priorities and lack of family cohesion. Additionally, the applicable legal and tax regimes, complicated economic conditions like exchange controls, currency issues, and political turmoil challenge not only the business side of making money and growth but, additionally, family relationships. These are all crucial factors for consideration.
23 January 25
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It is the case that most family businesses do not last two generations which results in significant capital destruction. There is also an economic and social price to pay for a country – loss of tax revenue, productivity, employment and capital investment. In many lesser developed countries and south Asian countries (India, Pakistan, the GCC are good examples), family businesses are significant taxpayers and generators of employment and wealth.
We would like to share some of our experiences and, in addition, highlight some of the key themes and challenges we regularly come across. Perhaps our series of articles will commence discussion amongst the community of friends, advisors, and families who, like us, clearly see the importance and potential power of well-run family businesses and are invested in deepening thought leadership. We of course recognise that a lot of academic work, and writing exists in this area. There are courses and workshops held across the globe by academic institutions, private banks, specialised consultants and others. Importantly, what is clear to us is that no one family is the same and a “one fits all” solution is not possible and dare we say dangerous to propose. It is the richness and diversity of human relationships, culture and religion, economic circumstance, background, education, and politics which means that advisors must be flexible and nimble in thinking and sensitive to these complex variables. Over the course of this series, we will dissect several aspects of family-owned businesses, shedding light on their distinctive dynamics, challenges, successes, and the lessons they offer to the broader commercial community.
The ownership and control of family-owned businesses may lie mainly within a single nuclear family or among several nuclear families with common heritage. Such businesses are not just profit-oriented enterprises; they are an extension of the family itself. The interplay of emotions, communication styles, and blood ties deeply influences the way the business operates. Understanding and leveraging these dynamics can be a source of immense strength, fostering loyalty, commitment, and a shared vision among family members and employees.
Moreover, we will highlight the strategies that can be employed by family-owned businesses to use their strengths, such as their long-term outlook, deep-rooted principles, and strong sense of commitment to overcome their common challenges. We will also delve into how these businesses need to adapt to evolving market environments, embrace open communication, and foster a culture that promotes professionalism, creativity, and flexibility.
Should you have any questions on this legal alert, please do not hesitate to contact Atiq Anjarwalla, Mona Doshi or Devvrat Periwal.
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Contributors
1. Kajal Patel – Senior Associate
2. Purity Wachira – Associate
3. Stephen Deche – Associate
4. Emmah Wakoli – Associate