Family businesses must prioritise legal readiness for succession

Tax policy shifts: a disruptive force for long-term planning

The Barometer data shows that 32% of business leaders cite further tax rises as a top short-term concern, second only to inflation. For family businesses, this concern is amplified by their unique asset profiles. With significant holdings in land, property, agriculture, and long-term investments, these firms are especially exposed to changes in Capital Gains Tax and inheritance tax regimes – both of which are already influencing long-term planning for 24% and 21% of respondents respectively.

Succession in family enterprises is rarely a quick fix. It’s a multi-generational process that demands foresight and family buy-in. Where it has been addressed, mid-course policy shifts, like those rumoured for the Autumn Budget, can derail even the most carefully constructed plans. The drag of uncertainty is itself a cost and the lack of clarity around fiscal policy risks pushing succession planning into the “too difficult” pile.

Despite the strategic importance of succession, many family businesses remain underprepared for the legal complexities it entails. The Barometer highlights that 23% of family firms now consider succession planning a long-term priority – a figure that signals growing awareness, but also shows there is room for improvement.

One of the most common pitfalls is the failure to distinguish between ownership and management succession. Without clear governance tools (such as shareholders’ agreements, family charters, and councils) families and businesses risk fragmentation. These legal mechanisms not only define voting rights and buy-sell provisions but also give family members a voice at the appropriate level, helping to keep both the family and the business united.

Estate planning is another area where misalignment can be costly. When wills, trusts, and business governance documents contradict each other, transfers can be invalidated and strategic goals undermined. Synchronisation across all legal instruments is essential to ensure continuity and avoid disputes.

Employment arrangements within family firms also require formalisation. Roles, responsibilities, and compensation must be clearly defined – ideally through employment contracts, performance-linked bonus structures and termination clauses. This clarity helps prevent misunderstandings and ensures fairness across family and non-family executives.

Moreover, minority and spousal rights are often overlooked. Ignoring these can lead to value erosion. Legal safeguards such as prenuptial agreements, share transfer restrictions and buy-out clauses for minority shareholders are vital to maintaining cohesion.

For families with cross-border assets or members, multi-jurisdictional planning is non-negotiable. Differing forced heirship and tax laws can complicate succession, making it essential to coordinate international advisors and structure with a global lens.

Finally, contingency planning is critical. The sudden death or incapacity of a key family member can leave a business rudderless. Powers of attorney, continuity plans and key person insurance are simple yet powerful tools that ensure leadership continuity in times of crisis.