Family Business Week is a week-long celebration of family businesses and the important role they play, not only in the UK economy, but across the globe – they are a universal force for good.
Buckles recognises that family businesses are the backbone of the economy, rooted in the local communities from which they draw their strength and which many have served for generations.
Some have such familiar brand names, their status as a family business is overlooked, as is the size of the positive impact these businesses have on our lives and those they employ.
With a growing stable of family business clients, Buckles will support Family Business Week with articles, advice and insights to help address the unique challenges they face, raising the profile of these issues, whilst celebrating the significant contribution this sector makes to the UK economy.
We recognise that family businesses are driven by their values, investment for the long-term, with community and sustainability at the heart of the family business model.
But challenges that may have little impact on a traditional corporate entity can have serious consequences in a family firm. Relationships and familial bonds can cause problems to simmer without resolution and disrupt the business or blow up completely and put everything at risk.
We support Family Businesses at work, at home and abroad
Our teams are experienced in supporting family businesses of all sizes, across a broad range of sectors, working in partnership with you to deliver comprehensive tailored legal solutions that help you achieve your objectives.
We provide practical and emotionally intelligent advice on a variety of issues, including governance and business structure, tax, succession planning, Trusts, employment contracts, property, remuneration, dispute resolution, commercial agreements, estate planning and family matters.
In the first of a series of pieces for Family Business Week, we look at the necessary steps a family should consider when welcoming a new member to the family, through a marriage or civil partnership, starting with pre-nuptial or pre-civil partnership agreements.
Day One
Pre-nuptial and pre-civil partnership agreements can help protect your family business
For most couples, the wedding checklist will contain a plethora of actions, but few will list signing a pre-nuptial or pre-civil partnership agreement as an essential to-do, prior to the ceremony being completed.
But for family business owners, and any of their children involved in the business, it makes sense to seek profession advice and prepare one as part of the marital process. Whilst not as romantic as a one-knee proposal on the beach, it could save the family a lot of heartache in the future.
A pre-nuptial (prenup) or pre-civil partnership agreement is a contract between prospective partners that sets out exactly who owns what in relation to the belongings, assets, property and money they will contribute to their union.
In some instances, the appreciation in value of a business can be deemed a marital asset if the appreciation takes place during the period of the partnership, even if one partner does not make direct contributions to the business and the property is the separate asset of one partner.
A prenup or pre-civil partnership agreement can help protect a family business, its income, its resources, its assets and ultimately its succession to the next generation.
For example, following a divorce or dissolution of a civil partnership, such an agreement could prevent a non-owner partner from accessing the business finances, acquiring a portion of the business, or gaining support based on the income generated by the business.
Not binding but a good start before joining the family
These prenup and pre-civil partnership agreements are becoming more common, particularly in the US and some European countries, where they are enforceable in law.
In the Courts of England and Wales, the position is a little different. Although a pre-nuptial or pre-civil partnership agreement is not necessarily binding, the existence of such an agreement is likely to be considered by the Court during any divorce or dissolution proceedings.
If no pre-nuptial or pre-civil partnership agreements exist, then the Courts will simply seek to divide the assets considered to be in the marriage or partnership pot. It is at this moment that one of the parties wishes they had excluded something, but finds it is too late.
This consideration by the Courts is driving the increasing number of couples that are choosing to enter into pre-nuptial or pre-civil partnership agreements, despite the weight a Court attributes to such an agreement depending on certain safeguards.
The purpose of these agreements is not to impose control. They are designed to prevent catastrophic conflicts from impacting the family business, whilst respecting the contributions each party makes to the family business.
These agreements are often used when a significant wealth imbalance exists between the parties and they want to maintain this situation, should their marriage or civil partnership fail.
Pre-nuptial or pre-civil partnership agreements are also useful when the imminent marriage or partnership is not the first for one or both parties and they want to protect or preserve assets for the benefit of children from a previous relationship.
And, of course, the family business may come into the category of assets a party may hope to protect for the benefit of children of a former relationship or marriage.
Importantly, these agreements can also be helpful in controlling what happens should the couple subsequently divorce or dissolve their civil partnership. A pre-nuptial or pre-civil partnership agreement can minimise disputes and can help avoid lengthy and expensive Court proceedings.
What do pre-nuptial or pre-civil partnership agreements include?
The draft agreement should include a schedule of the significant assets owned by each party. It should also specify what happens to them should they divorce or dissolve their civil partnership.
The agreement can also specify what is to happen to any property, other belongings and even how the family business is to be dealt with. It can also detail any form of pension share and maintenance to be paid after the divorce or dissolution.
Pre-nuptial or pre-civil partnership agreements should be drafted no later than 31 days before the marriage or civil partnership, although it makes more sense to make these serious decisions further out from the ceremony, with three months perhaps a better target.
Review periods and clauses confirming the intentions of the parties if they subsequently have children, should be included and another reason for seeking experienced legal advice.
To ensure the agreements entered into carry more weight if required later, both parties should seek the advice of different law firms to understand what rights they may be giving up and to avoid a conflict of interest or an appearance of undue influence.
Pre-nuptial or pre-civil partnership agreements can be tough subjects to raise with a potential partner for life, but it is crucial to acknowledge that the decision will affect not only you but also your family business and those who also rely on it for their lifestyle.
Pre-nuptial or pre-civil partnership agreements can also help the long-term success of your family business by preventing the need for fractional sales and buyouts to address divorce decrees, whilst allowing the immediate family to retain management decisions.
Ultimately, these agreements prepare the family and its business for disruptive events. They should be thought of as the insurance policies we hope we never have to use, that offer the peace of mind we need.
The Family Team here at Buckles will advise you as to the relevant merits of pre-nuptial or pre-civil partnership agreements given your circumstances and help you prepare such an agreement if required.
