Bad Blood in Business – How an Intervention Overcame a Brothers’ Battle

Running any business has its challenges, be it internal issues, for example hiring the right people, to external factors like a changing economy or market competition. The stresses and strains put on directors can test any working relationship. However, this can be intensified when a family-owned business is involved, and those relationships have a personal dimension too.

In multi-generational businesses this can be particularly pronounced where the additional dynamic of the existing family members and the “fresh blood” have competing ideas on the management of the business. Often not every member of the next generation will be involved in the business on a day-to-day basis but will retain some interest or stake, be it simply holding shares or taking a non-executive role on the board. The interaction of these parties can become particularly difficult if their interests are not directly aligned.

This was the case in a recent intervention I was instructed to act on.

C Ltd (“the Company”) was a family-owned property investment company with its principal activity being the letting of two commercial sites. The shareholding in the Company had been passed on to the second generation some time ago but it was only really following the death of the parents that matters came to a head.

Edward (not his real name) was not involved in the day-to-day running of the business but became concerned that Company proceeds had been distributed disproportionately in favour of his brother, Francis. I was approached by the family’s solicitor to assist with seeking a resolution to the deadlock that had arisen between the siblings.

I was initially asked to act as advisor to the board to try and mediate a settlement between the brothers and set up some sensible corporate governance to ensure all parties could feel comfortable. In previous discussions, a deal had been proposed that would see Francis acquire Edward’s shareholding, but it had faltered as Edward and his advisors were not comfortable that they had the whole picture.

It became clear that whilst Edward was content for his brother to acquire one of the sites, it was impossible to agree a value for the other as there was significant development potential.

The answer therefore was to restructure the deal to obtain an outcome that both brothers would be happy with. This involved drawing up a Scheme of Reconstruction under s110 Insolvency Act 1986, effectively splitting the Company into two and putting each of the two sites into its own company.

Francis could then buy Edward’s shares in the company where the value was largely agreed by the parties and the other site could remain trading with both parties having a shareholding as before. The problem was that the continued trade of this remaining site meant that all the existing practical issues continued, albeit on a reduced scale. To deal with this it was therefore agreed that I would act as sole director of this company acting in the best interests of both shareholders.

Neither of the brothers would be involved in the day-to-day running of this company thereby removing any emotion from the disposal of the site.

Once I had got my feet under the desk it was then necessary to look for a longer-term solution for the site. My options were to:

  • Seek a sale of the company or
  • Seek a sale of the site and liquidate the company to enable a dividend to shareholders.

With the assistance of a local agent, I tested the market for the sale of the site while also pursuing my preferred option of a sale of the shares of the company.

During this time, I managed the affairs of the site, collecting rental income from the units on the estate, and re-letting the units as and when leases expired.  From this income I was able to ensure that profit was generated and regularly distributed dividends to the shareholders, ensuring their ongoing income stream.

Eventually an offer for the purchase of the shares was received and agreed, however the sale agreement and tax clearance from H M Revenue and Customs took time to finalise. Some two years after my appointment as director I concluded the sale of the company.

Both brothers were delighted with the outcome and are now able to continue their separate business interests.

These matters are usually very complex and professional advice is recommended at the earliest possibility. For more information on the benefits of intervention, contact Ruth on

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