Family Business Succession - Legal Insights

• Published date: 13 March 2024
• Subject Matter: Wealth Management, Family and Matrimonial, Wealth & Asset Management, Wills/ Intestacy/ Estate Planning
• Law Firm: Withers LLP
• Author: Ms Mabel Lui and Daniel Tang

Forward-looking family businesses have demonstrated remarkable resilience around the world, empowering them to weather market volatility and commercial shifts. These enterprises have not merely survived but thrived.

A common trait among these businesses is the founders' foresight for strategic, long-term planning. This includes diversifying revenue streams and segregating business operations to facilitate efficient succession by future generations.

Such planning allows subsequent generations to maintain the founders' core values and continue their legacy. It also lays a foundation for future generations to not only preserve the family wealth, but also expand the business.

Mabel Lui, Head of Greater China Commercial at Withersworldwide, an international law firm, says that a family enterprise's key feature is 'by the family, for the family.'

Mitigating family disputes

Family relationships' complexities can sometimes spark rivalries among family members. Many prosperous family enterprises acknowledge the importance of mitigating these conflicts by dividing the family business among different family members. This strategy minimises potential disruptions and damage caused by sibling rivalries. Lui notes, "Business segregation is potentially more effective in ensuring the family business's smooth development than any written rules."

Many successful businesspeople involve their children in the family business while maintaining control

In addition to this 'divide and prosper' approach, business diversification and modernisation are also crucial. Diversification involves expanding operations into various areas to broaden income sources, tap into high-growth potential, and reduce reliance on the original industries, thereby mitigating the risk associated with a single or...