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Goblet with ominous vapour rising

A poisoned chalice

Mariel Stringer-Fehlow details pitfalls for executors following the death of a shareholder of a family business in England and Wales

Family businesses often have several common features. They are frequently 'owner-managed', i.e., the same family members that hold shares in the business also sit on its board and effectively run it. This gives such businesses and their members a distinctly 'private client' character and the relationships between the family members become of crucial importance.

These businesses have often grown organically over many years, resulting in quirks as to how they are run and often understandings between directors/shareholders that are not recorded in writing. Indeed, many family businesses advisors come across in the context of such disputes do not have formal shareholders agreements and any governance documents that do exist are often not updated.

Intra-generational disputes often brew as the parties collectively age (and potentially introduce a wider generation into the business). Although the ideal scenario would be that families in such positions feel able to communicate candidly around succession planning, this does not always happen and a dispute may instead erupt when a family member dies.

It is at this point, following the death of a shareholder/director within the family, that the executors of the deceased can find themselves with something of a poisoned chalice in the form of a testamentary shareholding to be dealt with.

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