Family business succession - legal insights

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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.’

It’s recommended that a family enterprise establishes a family governance structure before approaching succession. The governance framework signifies the shift of decision-making from the founder alone to a collaborative and collective process among family members, according to Lui.
 
Family members should be briefed on shared values, a common mission, and a collective vision for the future. Family governance helps manage wealth, define roles, set boundaries, and balance competing interests.

The framework addresses roles, rights, and responsibilities of family members, formalises business relationships, and creates policies for family employment, development, and compensation. She notes, “It also provides a forum to resolve conflicts, preventing potential dissolution or sale of the family enterprise,