Family Businesses businesses are the foundation of Canadian enterprises (some 80% or more of all businesses are family businesses).  Likewise, family businesses in a family dispute are the cannon fodder of Litigation Lawyers.  Usually, the family business works with a modicum of documentation (which, Courts, in dispute issues, seem to rely upon).  The record of the family business is usually scant and based upon verbal understandings and relationships.

Not a particular condemnation of human nature – just an observation.

In all too many cases, the costs of unwinding family businesses (and usually at the time when there is a disagreement) far exceeds the costs of setting up, at the beginning and at each instance circumstances change, records of the position/understandings/agreement among the parties.

In our experience, convincing family businesses and business persons of the necessity to document/document/document is akin to pushing bamboo shoots under fingernails…. right up to the date of dispute when literally $10’s or $100’s of thousands of dollars are spent unraveling business relationships and all of the money is non-revenue producing to the business and only feeding the lawyers.

Stop this process.

Face the facts to be addressed.

Require every step to be recorded.

Everyone will thank the fellow who pushes this — yet only at the time the disagreements develop and only then as the result of the previously irritating documentation having forced everyone to the table.

Joint Family Ventures

The phrase “joint family venture” is a relatively new concept developed by our Courts to address the circumstance in which life mates/husbands and wives/boy and girl carry on a business together and eventually have their relationship disintegrate.

It is not unusual to have mature mates have their personal relationship fall apart yet part of their personal relationship had been the operation of a business which one or the other or possibly both operated.

Invariably, in these business ventures, there is no documentation to record things like shareholders’ agreements, what happens if the parties split up or rights and obligations as between the parties. These are, frequently, the most vexing of issues either Family Law lawyers or Commercial lawyers face because there is no fall-back to any established procedure for resolution.

Example: Gentleman has his own business and together with is life mate establishes a second business. The life mate operates the second business while the husband carries on his venture. The secondary business is essentially 50/50 but the wife carries the bulk of the responsibilities for day to day operations.

The relationship falls apart. There is no provision for husband to buy out wife or vice versa or for that matter any resolution of the division of the secondary business. All expenditures of the household in previous years whether paid by one or the other of the mates is largely irrelevant.

In these cases, first and foremost, each mate may require clarification of their respective rights, primarily to assist in determining what their legal parameters are. Then, if communication can be had between the mates, the reasonable approach suggests trying to settle matters on your own. A Collaborative Family Law lawyer may be of great assistance. Recommendation: Verena Fraser at Feltmate Delibato Heagle.

Thereafter, recording the agreements reached is critical and each mate should get Independent Legal Advice before completion.

We’d be pleased to be of assistance.

Family Business and The Art of Letting Go

Family Business Welsh LawElsewhere on this website you’ve seen articles relative to the succession issues of a family business.

Recently (Thursday, October 11, 2012), the Toronto Star featured an article addressing small businesses. The caption was “The Art of Letting Go”. The article reported that the Bank of Montreal, in a recent study, found 37% of small business owners having some form of a succession plan, up from just 15% just 2 years ago.

Essentially, there seem to be 3 alternatives: selling the business to a family member; selling to employees of the business; or potentially selling to third parties, whether competitors or an investor.

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