The failure to plan for the transfer of family wealth to future generations is one of the main causes of the dissipation of wealth over two or three generations. In particular, the successful continuation of a family business over a number of generations depends on planning for succession to the management and control of the business.
Why is a governance structure needed?
As a family business devolves through generations the ownership and control of the business can be split between many individuals. This can:
- make it difficult for key decisions to be made - for example, in relation to the potential sale or expansion of the business;
- create tensions between family members - for example, between those family members who are actively involved in running the business and those who merely enjoy the economic benefits derived from the business; and
- lead to instability in the running of the business.
Read more in our guide.