“Wealth can serve the family as an invaluable gift that fosters unity and strength or as a plague that divides the family through irreparable dysfunction.” Gray (2007, 9. 18)
A successful business transfer takes place when “the skills and the desire to be in business” are transferred from one generation to the next (Shrapnel, 2014, p.7). In light of the increasing number of family members with each new generation, each having different expectations, family wealth can be easily squandered, unless managed properly. This would mean that the hard work of past generations is lost.
Family wealth can be preserved by:
- Educating younger generations to take responsibility for the preservation of family wealth and encouraging their involvement in business decisions. By doing so, communication within the family is enhanced and younger individuals are exposed to current practice.
- Setting up governance structures to regulate the involvement of all family members within the business.
A family charter can enforce certain regulations to ensure that employment within the business is not assumed and that members’ roles in the business are defined.
- Drawing up a clear succession plan
It is never too early to prepare a succession plan. The earlier that this is drawn up and communicated not only amongst family members but also with all other members of the firm, the better!
Failing to prepare proactive strategies which consider possible circumstances in the future, can jeopardise the business’ continuity.
Contributed by Maria Farrugia, Audit Senior