Bass, Berry & Sims attorney Richard Spore discussed conflicts and other challenges related to ownership structures of family businesses in the August 2021 issue of Aqua Magazine. One challenge for family businesses over time is making important decisions when ownership shares have been distributed across relatives and generations, leaving uninvolved “passive” shareholders with a say in key operations. “Problems can arise when people inactive in the business must be consulted to one degree or another about key management decisions,” Richard said. “Passive owners often resist shouldering the risks of change and can have conflicts of interest with those running the enterprise.”
Addressing ownership and management issues early is crucial to finding solutions consistent with the business’ interest and to promote cooperation among the family owners. This includes mechanisms to transfer controlling interests and shares, such as with a buy-sell agreement. “Buy-sell agreements need to make sense for all parties involved, or people will refuse to abide by them,” said Richard. “And that means the business may end up with the very problem it wanted to avoid in the first place – litigation. That’s difficult and painful for everyone.”
The full article, “Family Business Survival,” was published by Aqua Magazine in the August 2021 issue and is available online. Aqua Magazine is a publication dedicated to retailers, builders and service professionals in the pool and spa industry.