In the dynamic landscape of modern entrepreneurship, where technology companies and unconventional work arrangements are becoming the norm, family businesses are facing a pivotal moment. The torch is passing from the conservative baby boomer generation to risk-taking new-age entrepreneurs, creating unique challenges in succession planning.
Succession, once a straightforward process, is now akin to navigating a minefield. With children seeking to cash in on their beneficial interests or shareholdings to fuel their own ventures, the need for careful consideration and expert advice has never been greater. Take, for instance, the recent Chambers v The New Zealand Guardian Trust Co Ltd case  NZHC 2084. The case unveils a host of complex issues surrounding the transfer of shares in a family business upon the father's passing.
To navigate this terrain successfully, seeking professional legal counsel is imperative. This includes examining family trusts for potential tax implications and reviewing shareholder agreements, family charters, and company constitutions. In the Chambers case, the only daughter of the deceased expected to inherit the company shares, but her stepmother held a contrasting view. The resolution of such disputes often hinges on the precise language of legal documents.
Estate planning emerges as a linchpin in this process. Many overlook its significance, but a thorough succession planning health check can provide a comprehensive solution to future family needs. It can also serve as a shield against claims under laws like the Family Protection Act 1955 and the Law Reform (Testamentary Promises) Act 1949.
The prevalence of blended families in New Zealand adds another layer of complexity. Without clear directives, potential rifts may arise, underscoring the need for meticulous planning. Engaging in candid discussions with a solicitor is vital. What may seem trivial to you could hold the key to a successful estate plan.
In today's entrepreneurial landscape, family businesses are faced with a defining moment. Navigating succession requires careful planning, professional advice, and open communication. The Chambers case serves as a stark reminder of the complexities involved. By taking proactive steps, families can ensure a smoother transition, preserving the legacy of their businesses for generations to come.
To discuss Business and Family Succession, contact Taufil Omar - (Special Counsel, Private Client Team)
© McVeagh Fleming 2023
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.