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Private Wealth: Managing and resolving family business conflicts

Posted on 25 June 2025

Victoria Pigott

Partner, Mishcon de Reya

Well uh, dealing with family and friends can be incredibly rewarding.  Err, families are rightly proud of the businesses that they’ve set up and that they can pass down a generation.  It’s usually satisfying for those working in those businesses to know that they’re providing not only for their families but also for the generations to come.  However, whilst working with your family members can be a blessing, it can also be incredibly difficult to work with those you’ve known for so long and it can on occasion become a curse.

Peter Steen

Partner, Head of Private Wealth Disputes, Mishcon de Reya

Are you talking about issues in terms of how the business is run?

Victoria Pigott

Partner, Mishcon de Reya

Yes.  So we often hear the phrase the first generation makes it, the second generation spends it and the third generation blows it.  People have a very different work ethic if they’ve been brought up in a wealthy, privileged background and it, it’s difficult for wealthy families to motivate their children and ensure that they have real ambition and a drive to study.  It’s a real issue when you bring up children in a privileged background, you hope that they’re going to go on to work in the family business but you want to ensure that they don’t have a sense of entitlement um, that prevents them from working for it and importantly not taking it for granted or assuming that their role is guaranteed.

Peter Steen

Partner, Head of Private Wealth Disputes, Mishcon de Reya

So it’s clearly a very difficult balancing act.  What can families do?

Victoria Pigott

Partner, Mishcon de Reya

The first thing to do and I think the most important objective is to set clear roles and expectations.  So are the children or the cousins all expected to go into the family business?  Is there an obvious successor?  Are there clear expectations of what you’ve got to achieve in order to be allowed to work in the family business?  There is always hierarchy in every family, both generations, sides of families and if divisions start to appear you’ve got to confront them.  Don’t let them fester.  You need to make it very clear to each family member what is expected of them.  You need to communicate.  Talk to them about division of the future, what it might look like but also listen to their queries.  Engage with the next generation, make them feel heard.  It may be that they are going to be overruled but giving them a voice, letting them speak, that they are heard and they have value given to their opinions and contributions.  And it, it might sound obvious, but a lot of families really struggle with favouritism; is there a golden child, the favoured one and if possible, try to avoid unequal treatment.  Or if there is one clear choice for the next CEO, the leader of the business, speak to the other family members and talk to them about why their characteristics might be better.  Manage everyone’s expectations.

Peter Steen

Partner, Head of Private Wealth Disputes, Mishcon de Reya

You’ve talked about expectations and communication.  Is it best that those things are written down somewhere?

Victoria Pigott

Partner, Mishcon de Reya

Yes.  So family businesses by definition are often much less formal but it is much better in the long run to have legally binding documents whether they’re shareholder agreements, partnership agreements, employment contracts.  The process of setting something out in writing is really helpful and it forces people to go through those kind of um, discussions.  What they are expected to sign up to, what the vision of the future is going to be.  So as the documentation is drafted and finalised, issues and concerns can be raised, discussed and decided upon as a family.  You need to make sure that the documentation sets out decision making processes in the future um so, clarify how major decisions are going to be made.  Is it a vote, majority vote?  Is it seniority?  Set out how disagreements are going to be managed.  Are they going to be dealt with through arbitration, in private, avoid the media.  It’s the drafting of and agreeing to these documents that is most likely to avoid the disagreements in the first place.

Peter Steen

Partner, Head of Private Wealth Disputes, Mishcon de Reya

And in addition to documentation, what else might be helpful?

Victoria Pigott

Partner, Mishcon de Reya

I think communication protocol are crucial.  So you will have members of the family who are involved in the day-to-day running and those who aren’t.  You need to make sure you have regular board meetings with proper agendas and minutes.  It all needs to be properly documented.  Do it formally.  Don’t do it at a family dinner.  But then obviously in terms of practicalities, the time you may all be together might only be at a family dinner, so carve out time before the dinner and announce, ‘we are now having a board meeting’ and then once it’s finished you can go on and have the family dinner.  It goes back to managing expectations and succession.  Not knowing what a business is going to look like in the future is unsettling and demotivating.  You need to be transparent about who is going to take it over, how transitions will happen.  Don’t make it a competition.  Don’t pit people against each other.  You need to avoid assumptions.  Put it in writing, have the discussions with all the stakeholders.

Peter Steen

Partner, Head of Private Wealth Disputes, Mishcon de Reya

And you are talking here about um, family members.  What about bringing in outside expertise?

Victoria Pigott

Partner, Mishcon de Reya

It’s obviously viewed with some scepticism people would like to keep it in the family, people think that you don’t want to air your secrets in public but if you have an exceptional individual the strategic use of exceptional advisors is incredibly valuable to a family and many family businesses have long, longstanding De Facto family members who have been there for a very long time, they are loyal and trusted by all parts of the family and their role assists with bringing this objectivity into the decision making that is so difficult in family businesses and often introduces specialist skills that the current family members may not have.  But obviously the caveat is, chose your advisors wisely and invest in them for long term commitment.

Peter Steen

Partner, Head of Private Wealth Disputes, Mishcon de Reya

And things invariably sometimes go wrong.  What’s your advice when that happens?

Victoria Pigott

Partner, Mishcon de Reya

Absolutely and even the most cohesive family structures can have issues.  Families are constantly evolving so children are becoming adults with opinions, people are dying, people are marrying others and bringing them into the fold and when these things happen, especially with the death of a senior member, there’s a real sense of loss and grief and with that comes the rebalancing of family dynamics.

Peter Steen

Partner, Head of Private Wealth Disputes, Mishcon de Reya

Do you have any specific pointers for when things go wrong?

Victoria Pigott

Partner, Mishcon de Reya

I think the most important thing is to address issues early.  Don’t let them fester.  Don’t let resentment build up and talk about any concerns as quickly as possible.  You need to use facts not emotion and keep the conversation focussed on the business.  Think about perhaps bringing in a mediator, a neutral third party who can facilitate difficult discussions, keep it on track and that’s often the best way to avoid full blown legal disputes.  I think that some families also have to accept that there are times when they will no longer be able to work together and you need to look at the viable options, the alternatives.  Many family business disputes end up destroying both the family business and most importantly, family relationships.  Don’t let that happen.  Be realistic about restructuring, being bought out.  Think about practicality rather than emotion.  And legal action should be your last resort.  I mean I’m a litigator who spends most of my time persuading families not to litigate, look at the alternatives.  But if it is unavoidable, chose lawyers who have experience in family business disputes.  They need emotional intelligence, they need obviously to be a commercial litigator but they need an understanding of family dynamics and empathy.  And families should learn from experiences.  Use them to create better systems and safeguards for the future to protect the most precious things which are your family business and your family.

How can you avoid family business disputes?  

Dealing with family or friends in business can be incredibly rewarding. Families are rightly proud of the businesses that they have set up and been passed down the generations. It is hugely satisfying for those working in their family businesses to know that they are providing not only for their family members – but potentially for many generations to come.  

However, whilst working with your family members can be a blessing, knowing those you work with so well, and over so many years, possibly being very similar to them, can also, sadly, sometimes be a curse. 

What challenges arise in running a family business? 

We often hear the phrase that the first generation makes it, the second generation spends it and the third generation blows it. People have a very different work ethic and ambition if they have not had a privileged background and it's difficult for wealthy families to motivate their children to study and have ambition. Bringing up children in privileged backgrounds and hoping that they will go on to work in the family business whilst ensuring that they don't have a sense of entitlement is a real issue. 

How can families balance dynamics and business needs? 

I think the first and most important objective is to set clear roles and expectations.  

  • All the children/cousins going into the family business? 
  • Is there an obvious successor? 
  • Are there clear expectations as to what qualifications people need in order to come and work in the business? 

By definition there is always hierarchy in families, both in terms of generations and "sides" of families when you get to the next generations. If divisions start to appear, confront them rather than let them fester. 

Make it very clear what is expected. Discuss what the vision of the future is going to be and what it might look like. Listen to queries and concerns by engaging with the next generations and what they are saying. It may be that they are overruled but it is important that they are heard and value is given to their opinions and contributions. 

It might sound obvious, but family businesses often struggle with favouritism. If possible, try to avoid unequal treatment or if there is one clear choice for the next CEO/leader of the business, speak to all family members about why their characteristics make them suitable. 

Should expectations be documented? 

Whilst family businesses are often less formal that non-family run businesses, that is often what causes issues. If you can have formal legally binding documents then you should, such as partnership agreements, shareholder agreements, employment contracts. Quite often the process is incredibly helpful. Set out in writing what the expectations are, what they are expected to sign up to and what the vision of the future is going to be. As the documentation is drafted and finalised, issues and concerns should be raised, discussed and decided upon as a family.  

Make sure documentation sets out decision making processes – and processes for dealing with disagreements. Clarify how major decisions are made, for example, whether by unanimous vote, majority or seniority. Set out how disagreements will be mediated in private. It is the drafting of and agreeing to these documents that is most likely avoid disagreements in the first place.  

In addition to documentation, what else is helpful? 

Communication protocols for all members of the family, even those who might not be part of the day to day running or engaged in the business. Make sure you have regular board meetings, which are planned with agendas and properly documented in the form of minutes that are circulated for comment. Do it formally (ie not at a family dinner) or if that is the only time you are together, carve out time before the meal which is precisely for that discussion.  

In addition to communication, make sure that you plan early for succession. Not knowing what a business is going to look like going forward is unsettling and de motivating. Be transparent about who will take over and how transitions will happen. Don't make it into a competition or pit family members against each other. It is crucial to avoid assumptions so put everything in writing following discussions with all the stakeholders. 

All this is based around family members – what about bringing in expertise? 

Whilst this can sometimes be viewed with scepticism – or the desire to 'keep it in the family' – strategic use of exceptional advisors can be incredibly valuable. Many family businesses have long term advisors who are de facto family members. Their role assists with bringing objectivity into decision making and often introduces specialist skills that current family members do not have. Choose your advisors wisely and invest in them for long term commitment.  

What should you do when issues begin to emerge? 

Even the most well structured family businesses and the most cohesive family units can have issues. Families are constantly evolving – people age, move from childhood to being adults with opinions. People marry and people die, which can cause a real sense of loss and a rebalancing of family dynamics.  

A few short pointers for when things go wrong:  

  • Address issues early. 
  • Don't let resentment build up. Talk about concerns ASAP. 
  • Use facts, not emotions, and keep the conversation focused on business. 
  • Think about bringing in a mediator. A neutral third party (mediator or business advisor) can facilitate difficult conversations and is the best way to avoid full blown legal disputes. 

If working together is no longer viable, look at options like buying someone out or restructuring ownership. Many family business disputes end up destroying both the business and family relations. Don't let that happen. Be realistic about restructuring or being bought out and think practically rather than emotionally.   

When is legal action necessary? 

Legal action should be a last resort. Our litigators spend a lot of time trying to help clients avoid litigation. If it is unavoidable – choose lawyers with experience in family business disputes. Family business disputes are different to standard commercial litigation – the lawyers need emotional intelligence, an understanding of family dynamics and a sense of empathy. 

Learn from experiences and use them to create better systems and safeguards for the future,to protect the most precious things – your family business and your family.  

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