Preparing your family business for the unexpected: creating an Emergency Board Plan

Posted on By Lydia Brita
Image saying 'emergency'.

Many family business owners in the UK underestimate the immediate impact that their sudden absence, due to death or incapacity, could have on the daily operations of their business. Estate planning often focuses on long-term strategies, but what about the day-to-day decisions that will need immediate attention? Preparing for these short-term scenarios can be as crucial as planning for the future, and an Emergency Board Plan is a powerful tool for doing so.

Drafting an Emergency Board Plan

An Emergency Board Plan provides guidance on managing the business in the event of a sudden absence, outlining short term key roles and responsibilities. Think of it as a practical, step-by-step protocol that outlines immediate actions to take if you’re unavailable.

The Emergency Board Plan isn’t a legally binding document. It’s a strategic guide that can prevent delays, reassure employees and instil confidence among key stakeholders.

Key elements to include in an Emergency Board Plan

A well-crafted Emergency Board Plan will address several important areas:

1. Financial management protocols
An Emergency Board Plan can specify steps for managing urgent financial issues, such as bank loans, cash flow, debt obligations and signing authority for checks. Ensuring that someone is prepared to handle these essentials can prevent cash flow disruptions and maintain trust with financial institutions.

2. Temporary leadership and decision-making roles
Identify key personnel within your organisation or trusted colleagues who can temporarily step into leadership roles.
The Emergency Board Plan may:

a. Assign decision-making responsibilities to specific individuals or advisors;

b. Outline how to hire interim executives, and

c. Establish a process for bringing in trusted advisors to guide the company through the initial transition.

3. Regular updates and reporting
The plan should outline how and when this interim team will report back to your family or the executors. The Emergency Board Plan can also set timelines for reviewing key decisions within the first week, month and quarter, ensuring all necessary actions are handled.

Making it a living document

Once the Emergency Board Plan is in place, it should be reviewed regularly and shared with your team. This allows it to evolve over time and can serve as an introduction to longer-term succession planning.

The Emergency Board Plan should also be shared with the business owner’s attorneys, who will have control of the shares in the event of incapacity. It can often be appropriate for business owners to create a separate business assets lasting power of attorney (or equivalent) that covers shares in the business only, rather than all of their assets.

The attorneys of such an lasting power of attorney can receive copies of the Emergency Board Plan, keeping the management of the owner’s business assets distinct from their personal assets, where different attorneys may be involved. Choice of attorneys requires great care, as selecting a person involved in the business could create a conflict of interest if that individual relies on the company for employment.

Getting comfortable with the process

At first, drafting an Emergency Board Plan might feel like giving up control. It’s natural to feel a bit hesitant. Many business owners operate with a ‘no one knows this business like I do’ mindset, which can make it difficult to delegate. But an Emergency Board Plan is not about giving up control. It’s about safeguarding the business you’ve worked hard to build by ensuring it can continue if you’re unavailable.

In cases where you feel a board might not understand your business’s intricacies, the Emergency Board Plan can still be a valuable tool. It can outline a strategy for the business, including options for an organised sale if needed, to avoid a rushed or ‘fire-sale’ situation. Alternatively, a well-developed Emergency Board Plan might even encourage family members, such as a spouse or children, to take on roles that ultimately strengthen and preserve your legacy.

Expanding the Emergency Board Plan into a vision for the future

As your Emergency Board Plan evolves, it can grow to include your vision for the business’s future. This can address how your board or key leaders should navigate market changes, growth opportunities, and other challenges. It can also reflect how these decisions might impact family shareholders, setting expectations for dividends and family involvement.

An Emergency Board Plan, alongside a structured will, lifetime trust, lasting power of attorney (or equivalent) and thoughtful company governance, offers a practical way to prepare for succession.

Instead of treating succession as a distant concept, these tools make it a manageable and concrete process that preserves your business and provides clarity for everyone involved. By proactively planning, you can ensure that your business continues to thrive, no matter what the future holds.

Hayden Bailey TEP, Partner, Boodle Hatfield

Transitioning your family business: a guide to letting go and moving forward

Posted on By Lydia Brita
Image of meeting.

The grit and determination that often drive family-business founders to success can, paradoxically, become obstacles when it comes time to transition leadership. Many founders struggle with letting go, whether due to a sense of irreplaceability, a reluctance to face the unknown, or simply the deeply personal attachment they have to the business.

Why letting go can be so difficult

It’s not unusual to think ‘no one can run this business as well as I can’, or to feel uncertain about what life might look like post-transition. These are real concerns, and they make succession planning an emotional and complex process. Yet, your next generation may feel stalled or even demotivated if there’s no clear path to transition. They, too, want the business to succeed, and they also need clarity about how they’ll be a part of its future.

Planning for succession: the challenges and benefits

Succession is about more than preparing for retirement or creating a will. It’s a multifaceted process that raises questions about not just who will lead the business but also how it will evolve. This means exploring tough questions, from family goals and career aspirations to the readiness of all involved. And while the process can feel overwhelming, preparing early can prevent confusion, misunderstandings and potential disruptions in the business.

Preparing the family and the business for change

Effective succession planning involves planning for change – not just within the business structure but also in relationships and roles. The family and the business need to be adaptable to navigate this significant shift. Rushing to answer questions like ‘who will take over as CEO?’ or ‘which child will inherit the business?’ without addressing the bigger picture can create frustration or even resentment.

Inside the family business, succession planning is ultimately about the family’s strength and unity. The real question becomes: ‘are we ready and willing to build a future together?’

Getting started: a step-by-step approach

Advisors can help you navigate succession planning, guiding you through a careful, structured process that includes:

1. Setting the starting point: Identify the moment or circumstances that will trigger the transition process and ensure that the family and key managers are on board with the need for change.

2. Managing uncertainty: Transition periods involve exploring multiple options and considering everyone’s perspective. Invest in educating key family members and team leaders about the upcoming changes and what’s required to make them happen smoothly.

3. Exploring alternatives: Evaluate all possibilities before making a final choice, and focus on finding solutions that will sustain the business for the long term.

4. Balancing compromise with vision: Work towards the best achievable outcome, even if it’s not perfect. Succession planning is rarely straightforward, but a balanced approach can help everyone reach a consensus.

5. Creating a timetable and structure: Outline a clear timeline for the transition. This could include public announcements, mentorship programmes for the next generation, and the necessary legal and financial steps.

Who should start the process?

Typically, the founder or senior generation takes the first step in succession planning by opening up the conversation. Making it clear that you’re ready to discuss transition can encourage the next generation to engage confidently without feeling like they’re ‘pushing you out’. This transparency helps create a foundation of trust and openness.

However, it’s equally essential for the next generation to know what they want for themselves. Are they ready to take on leadership roles? Do they have specific goals for the future of the business? These discussions should feel collaborative, not passive.

Viewing succession as a collaborative negotiation

Ultimately, succession is a joint negotiation where everyone can express their ideal outcomes and work towards an agreement. Successful succession planning is less about complete agreement and more about achieving a shared goal, even if everyone doesn’t agree on every detail. Think of consensus as ‘I don’t agree with everything, but I support our overall direction enough to see it succeed.’

By addressing succession thoughtfully, you can create a legacy that not only sustains the business but strengthens family relationships for generations to come.

If you would like professional advice on transitioning your family business you can speak to a STEP member, qualified estate planning professionals, using our Find a TEP search.

It’s good to talk and even better to plan the future of your family business

Posted on By Lydia Brita
Image of people talking.

Running a family business is more than a job. It takes a huge amount of time, energy, money and commitment to keep the business afloat. There’s a lot of people to consider and work to be done. From accounts to admin, there are no end of tasks.

It’s easy, then, for ‘talking about the future’ to fall to the bottom of a long to-do list. However, if that’s where it stays, there might not be a business to pass onto your loved ones, or whoever you think is best placed to run it.

If you don’t have a will or succession plan that details what will happen to the business/who will run and own the business after your death, there could be conflict and the business may not pass to the people you would like it to.

One in four of the family business owners in the UK that STEP surveyed shared that their biggest fear about not having a succession plan was that their business would close.

The good news is that there some simple steps you can take to put a plan in place. We recommend that you:

Start the conversation

1. Start small: you don’t need to decide everything at once. Just letting your loved ones know you want to discuss the future of the business is a great place to start.

2. Keep it ordinary: have the conversation over a meal, on a walk or a time when you have time to have an open chat. It doesn’t need to be formal.

3. Be direct: none of us can escape the inevitable, but by talking to our loved ones about our wishes, we can save them a lot of heartache and expense when it comes. Family business owners that have done this say that it has benefited the business to have had done so.

Once you’ve got started the conversation, you can:

Focus on what matters

1. Focus on the positives: each generation can bring different knowledge, such as an understanding of AI. It won’t protect younger generations to leave them without the knowledge or skills to continue the business. If everyone would like the business to stay in the family, talking is the place to start.

2. Focus on your values: what does your family business stand for? And will the wealth your family business creates be deployed in a way that you agree with? A family constitution is a great way to get everything in writing. Read STEP’s guide to setting up a family constitution.

3. Focus on the worst-case scenario: if the person running your business weren’t able to do it, who would? Having a plan ready should the worst happen will help the business to survive. Read STEP’s guide to preparing your family ‘business for the unexpected’.

Plan and Review

1. If you need to get a will, it might not take as long as you think. If you are based in England or Wales, our handy guide to getting starting with a will can help.

2. If you have a will, make sure it is up-to-date. Review it every five years, particularly when you have a change of circumstances, such as a birth, divorce or a new marriage.

3. Who would you want to run the business if you weren’t able to? Talking to your loved ones and having a succession plan that sets out your wishes will help the business can thrive, no matter what.

4. Talk to an expert: a STEP member who specialises in working with family businesses can give you the support you need to put your will and succession plan in place. They can also advise on trusts that might be appropriate for the business and Lasting Powers of Attorney. You can find out more about the different kinds of trusts here.

STEP has members who can advise you on how best to plan as a family business owner. Use our Find a TEP service to find an expert near you.