Family Business & the Next Generation
Trust is what most family businesses run on, and a record is what protects it
Writing something down can feel like a lack of trust. In practice it is often a courtesy: it means nobody has to rely on memory, and nobody can be accused of changing their story. This session explains what families usually leave unwritten, why it matters later, and which kinds of professional help are relevant to each question.
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Memory fails, and so does goodwill, usually at the worst moment.
Family arrangements are often made in conversation: who owns what, what a relative will be paid, who will take over, what was promised to a daughter on her marriage or to a son who stayed. Everyone remembers it a little differently, and some of those who made the arrangements are no longer alive.
Writing things down does not stop disagreements. It does mean the disagreement is about what was meant, not about what was said. It also makes it easier for a lawyer or chartered accountant to advise, and for the next generation to understand where they stand.
This session is general information, not legal, tax or financial advice. What is possible or required depends on the form of the business, the family's community and personal law, the property involved and the current rules. It is not family counselling. Every family needs its own advice.
What is worth putting in writing
35 topics across 7 areas. Seven areas, with the kind of professional help each usually needs.
Roles and ResponsibilitiesThe simplest place to start.5
- What each family member is responsible for
- Who reports to whom, and who decides what
- Working hours and expectations
- How roles are reviewed
- What happens when a relative wants to change role
This is good practice rather than a legal matter, and needs no lawyer to begin with.
Pay and DrawingsWhat each person receives, and why.5
Payments to family members have tax consequences, and the way they are recorded matters. A chartered accountant should be asked what is appropriate for the business and how to document it.
- Salaries and any other payments to relatives
- How increases are decided
- Regular withdrawals by owners, and how they are recorded
- Loans between the family and the business
- Who is paid for work and who for ownership
OwnershipWho owns what, as the paperwork says.5
- Whether the business is a proprietorship, a partnership, a company or a Hindu undivided family business
- Who holds the shares, partnership interests or property, and whether that matches what the family believes
- Whether premises or property are owned by the business, or by individuals
- Bank accounts, licences and registrations, and whose name they are in
- What the family's agreements say, if anything
The form of the business decides which law applies and what documents can be made. Ask a lawyer and a chartered accountant.
Partnerships and the LawA point that surprises many families.5
Under the Indian Partnership Act 1932, a partnership may be oral and registration is optional, though section 69 limits the ability of an unregistered firm and its partners to sue to enforce certain rights. Families in partnership often rely on memory for years. A deed reduces what has to be reconstructed later.
- The Partnership Act does not require a written deed, though a written deed is generally advised
- An unregistered partnership firm faces limits on bringing certain legal claims
- Rights and duties of each partner, and profit shares, are best written
- Admission and exit of partners, and what happens when a partner dies
- A lawyer should draft or check the deed
Joint Family and InheritanceWhere personal law matters.5
- Property held jointly by a Hindu family follows its own rules, which have changed over time
- In 2020 the Supreme Court held, in Vineeta Sharma v Rakesh Sharma, that daughters have the same coparcenary rights as sons by birth
- Other communities follow different personal laws
- A will, a family arrangement or a settlement may each be suitable in different situations
- Whether a document needs to be registered depends on what it does
This is only a pointer to why professional advice matters. It is not advice on any family's position.
Joining, Leaving and DisagreementThe part nobody wants to write.5
- What happens if a relative wants to leave
- How their interest would be valued and by whom
- Whether a relative can sell to an outsider
- How disputes are to be resolved before going to court
- What happens on death, illness or separation
Succession and HandoverWho, when and how.5
- Who is expected to run the business, and by when
- The founder's continuing role, if any
- How other children are treated
- What happens in an emergency, before any plan takes effect
- How the plan will be reviewed
What stops families writing things down
- The fear it will look like distrust
- The belief that everyone already knows
- A reluctance to raise death, exit or disagreement
- The cost, or the sense that it will be complicated
- Not knowing whom to ask
What participants leave with
- A list of what is unwritten in their own business
- A ranking of which to write down first
- A way to raise the idea with relatives
- A list of questions for a lawyer and a chartered accountant
- Understanding that this session is general information, not advice
How the session runs
People from family businesses describe what they did and did not write down, and what that meant later. A short walkthrough of the areas above follows, with a worksheet for each participant's own family. A lawyer or chartered accountant may be invited to explain, in general terms, what each kind of document is for. They are not there to sell their services, and the session gives no advice on any individual case. Evenings or weekends, in person or online.
What your students leave with
- A list of the arrangements in your own family business that exist only in memory
- A clearer sense of which are worth writing down first
- An understanding of which questions are legal, which are tax and which are simply good practice
- A way to suggest writing things down without it sounding like distrust
- A short list of questions to take to a lawyer and a chartered accountant
- Awareness that the law, and each family's position, differ, and need advice
Scheduled sessions
Nothing scheduled yet
Sessions are arranged with a college once a date is agreed. Ask us and we will find the right person for it.
A student rather than a college? See what is coming up, or ask your placement team to host this.
A short document today saves a long argument later.
Tell us who your students are and what stage they are at. Sessions are free for participants.