Warning issued as business owners neglect succession planning

More than four in five West Midlands business owners are leaving themselves vulnerable to future headaches over the ownership or management of their business by neglecting to deal with succession planning issues now, a new survey has revealed.

A survey of regional business owners carried out by leading Black Country law firm Higgs LLP has shown that vital issues surrounding the ownership structure of their company are being ignored by the vast majority.

Some 84 per cent of respondents admitted they had never reviewed their company’s Articles of Association.

Half of those surveyed also revealed they weren’t sure whether they had a Shareholders’ Agreement in place with their fellow owners, with a further third confirming they did have an agreement but weren’t sure of the details included in it.

Paul Hunt (pictured) – who heads up the business succession planning team at leading Midlands law firm Higgs LLP – believes the results provide a concerning backdrop for business owners.

He said: “Our conversations with many business owners have led us to believe that succession planning isn’t high on the list of priorities and this new survey has provided confirmation of that.

“It’s vital business owners regularly review their arrangements and put in place or amend their company documents where necessary or they will be governed by a set of rules which are, in all likelihood, unsuitable for their requirements.

“For instance, every limited company will have Articles of Association, but it’s quite common that business owners are unaware of their effect. These rules are often some distance away from what is needed to meet the short and long-term objectives of the owners.

“We totally understand that, occupied with the task of building and operating a successful business, it is not always easy to find the time and headspace to step back to review the structure of a business and plan for the future.

“However, even for new start-up businesses, beginning the process of thinking about succession and the long-term vision for the company is an important exercise. It’s never too early to start.”

The position on death is often also overlooked.  The Higgs LLP survey revealed that 80 per cent of business owners surveyed were unsure if their Will and company documents were aligned.

Paul added: “We often see problems when a key shareholder dies because there is either no suitable provision in their Will or what’s written in there is at odds with what the company documents say.

“People generally understand that they should have a Will but often overlook the fact that their wishes may be overridden by the company’s constitutional documents.”

For an initial conversation around succession planning, contact Paul Hunt on 01384 327123 or paul.hunt@higgsllp.co.uk