Keep it in the family, not in court

The Welsh farmer’s daughter taking legal action against her parents over her rights or otherwise to the business has been making the national news. While this case can’t be commented on while it’s before the courts, the principles raised affect many farming families, and other small businesses. What makes farming different is the value of the asset, which turns what is ultimately a sad family dispute into a multi-million pound case that attracts press interest.

Battles within families through the legal system never end well for either side, which is why lawyers push hard for people to find an amicable settlement before the case comes to court.

This case is about whether one party was right to assume they’d receive a share of the business in return for working in it, and allegedly making sacrifices to do so. It’s about a misunderstanding of intentions, and underlines why families need to discuss succession.

This is often avoided in the UK, but in Australia and New Zealand it’s common to use independent facilitators to guide such discussion. This creates a neutral environment, and facilitators are seen as more independent than family solicitors or accountants, which have had a long-term relationship with the business.

Things go wrong when intentions are misunderstood. This can be difficult for parents. It’s about talking about a future when they’ll no longer be part of the business. It also forces the pace on decisions about which, if any, children will be involved with the business and what will happen, financially, for those who choose not to be.

It’s tempting to put these issues off, but assumptions will then fill the vacuum. A son or daughter may assume they’ll inherit the business, and a parent will assume it’s what they want. But this may not be the case, so it’s better that this is discussed sooner rather than later.

If a son or daughter is going to take over the business a strategy has to be put in place. Part of succession planning is about the handover of control, often by making them a partner. Equally if other children have to be compensated for not getting a share of the assets, it’s prudent to begin planning for this.

There have been plenty of examples of farm businesses, which can’t afford it, having to find the funds needed to buy out other family members whose cash windfall is then resented. If this is planned for it can be done, but if it only emerges on the death of a parent it can be difficult to fund, leading to disagreements.

If a succession plan is in place change can be planned, including finding a new home for parents if they opt to move off the farm for practical reasons. If this goes wrong, due to a head-in-the-sand approach to succession, especially to the degree that it ends up in court, it will create ill feelings from which a family is unlikely to recover.

One thing that’s emerged from facilitators is that the succession discussion can be a chance for children to say they don’t want to go into the business, and that the assumption they’ll do so is wrong. This isn’t easy to say, but facilitators help get it into the open – and that will give parents time to explore other options, from share farming to an orderly sale of the business.

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