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Family disputes are bad for farming business

 

Posted on 18 May 2015

According to a recent market report, the number of farms in the UK is consistently reducing partly as a result of many traditional family farms not encouraging succession to sons and daughters resulting in land being let. Recently, there have been high profile family succession disputes within the farming sector ending in legal battles which, if planned for, could have been avoided.

Like any farming business, one run by a family needs appropriate governance and systems in place to reduce the likelihood of disputes ending in Court.

Farming business advisory expert and Partner at Smith Cooper Catherine Desmond commented: “as professional advisors, we regularly see cases where family businesses including farming enterprises and those holding property are brought to a near standstill because proper agreement between the parties involved has not been discussed and planned at the outset.

We also see cases where the lack of a Will or communication of wishes between family members drives a wedge between those left behind and in some cases the family farming business will be neglected and fail or have to be sold as a result of a lengthy and costly dispute or uncertainty.”

Whilst not specifically a  farming case, the recently released Midlands Bhusan v Chand case is a striking example involving a family who between them owned considerable property and business interests.

The proprietary estoppel case involved a disagreement over the ownership of property, where no formal business structures or trust arrangements were agreed between the family members involved.  Unfortunately, when the time came that they wished to go their separate ways and divide the assets between them, it ended in Court.

Catherine suggests that businesses should “plan for change” before any disputes have had an opportunity to arise and that there are essential tools which should be put in place as early as possible in the life cycle of a family business.

Catherine added: “experience has shown that businesses that seek professional advice at the outset to choose the best structure for a farming business or joint property venture face fewer problems.

Top tips

1         Seek professional advice at the outset to choose the best structure for your business or  joint property investments

2        Document the agreement between family members involved and remember to think ahead e.g. plan for "joiners and leavers" and what should happen in the event of a disagreement

3        Make a will and review it regularly

4        Ensure that your business agreement and the terms of your will are consistent with each  other

5        Communicate regularly with the family and your professional advisors, if possible holding  family board meetings where several members are involved to ensure that potential discord is picked up early and dealt with reasonably

6        If family communication becomes difficult ask a trusted advisor to mediate or help the process along where possible

In summary, plan for change.....your business and family will be much healthier for it!
 

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