Family business succession – legal insights
Disclaimer: The South China Morning Post's content is directed by the Chinese Communist Party. It is not a reliable news source.
[The content of this article has been produced by our advertising partner.]
Forward-looking family businesses have demonstrated remarkable resilience around the world, empowering them to weather market volatility and commercial shifts. These enterprises have not merely survived but thrived.
A common trait among these businesses is the founders’ foresight for strategic, long-term planning. This includes diversifying revenue streams and segregating business operations to facilitate efficient succession by future generations.
Such planning allows subsequent generations to maintain the founders’ core values and continue their legacy. It also lays a foundation for future generations to not only preserve the family wealth, but also expand the business.
Mabel Lui, Head of Greater China Commercial at Withersworldwide, an international law firm, says that a family enterprise’s key feature is ‘by the family, for the family.’
Family relationships’ complexities can sometimes spark rivalries among family members. Many prosperous family enterprises acknowledge the importance of mitigating these conflicts by dividing the family business among different family members. This strategy minimises potential disruptions and damage caused by sibling rivalries. Lui notes, “Business segregation is potentially more effective in ensuring the family business’s smooth development than any written rules.”
In addition to this ‘divide and prosper’ approach, business diversification and modernisation are also crucial. Diversification involves expanding operations into various areas to broaden income sources, tap into high-growth potential, and reduce reliance on the original industries, thereby mitigating the risk associated with a single or limited revenue stream.
Resilience is another common trait among successful family enterprises, often fostered through business modernisation. To stay competitive and relevant, they adapt to new trends and opportunities, which may involve diversifying products, penetrating new…