Taken From: http://www.allanjanes.com/

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Blood Ties Are Unfortunately No Guarantee of Business Harmony

Family companies can often work well as a business model but, sadly, ties of blood are not a guarantee of harmony. The point was illustrated by one case in which a falling out between brothers led to the collapse of their once successful motor parts and property businesses and culminated in a High Court dispute over money.

The older brother was suspicious of his younger sibling’s dealings with the motor parts company’s money and took steps to freeze its bank account. Amidst growing tension, they met at a place of worship and it was agreed that the older brother and his wife would be bought out of the company, and the property partnership that he also ran with his sibling, for a total of £1.6 million.

Negotiations thereafter broke down, however, and, following a formal demand from its bank for immediate repayment of all sums due, the company was placed in administrative receivership. The older brother subsequently launched proceedings against the younger in order to enforce the buyout agreement.

In upholding his claim, the Court rejected the younger brother’s plea that no binding contract had been negotiated and that they had at most achieved an agreement to agree. His argument that the agreement was void, in so far as it provided for the purchase by the company of its own shares, also fell on fallow ground, as did his claim that he had signed the agreement under economic duress.

Following its entry into receivership, the company was of negligible value, but the younger brother was nevertheless obliged to honour the terms of the buyout agreement. Although the exact amount of the older brother’s damages award had yet to be calculated, he was in principle entitled to £1.6 million, less £570,820 that he had received from certain property sales.

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