A family business dispute is two disputes at once. One is about the business: control, roles, pay, dividends, valuation and strategy. The other is about the family: fairness between siblings, respect for the founding generation, in-laws, and decades of history. Resolving one without the other rarely lasts. Mediating these matters well requires an understanding of both, and of how they interact.
Why family group disputes are different
- Many parties, several generations. It is common to have parents, several children, their spouses and sometimes cousins at the table, each with a different stake. Some own shares, some work in the business, some do neither but expect to benefit.
- Overlapping roles. The same person may be a director, shareholder, employee, trustee, beneficiary and sibling. A grievance in one role often shows up in another.
- Unwritten rules. Many family businesses run on understandings that were never recorded: who will take over, how profits are shared, whether family members can be dismissed.
- Culture and face. In Chinese and Asian families, respect for elders, the expectations placed on sons and daughters, and the importance of not losing face shape what can be said openly and what must be handled privately.
How I approach family group mediations
- Mapping the family and the business. Before the mediation, I map the family members, their ownership through companies and trusts, and their roles. The legal structure often explains the dispute.
- Separate preparatory meetings. Meeting each family member or branch separately allows concerns to be raised that would never be said in front of a parent or sibling.
- Sequencing. Large family mediations are often run in stages, dealing first with the issues on which agreement is easiest, and with the founding generation and the next generation in different sessions where appropriate.
- Separating ownership, management and family issues. Who owns the business, who runs it, and how the family relates to it are three different questions, and each can be agreed separately.
- Working with the numbers. I am accounting-trained and an Accredited Family Business Advisor, so I can work through accounts, valuations and cash flow with the family and test whether a proposed settlement is financially realistic.
The four Ds
Family businesses rarely fail because the business fails. They fail because the family does, and usually at one of four moments: death, disability, dispute or divorce. Each can put shares, control and family relationships into play at once. A mediation that resolves today’s dispute should also leave the family better prepared for the next of these events, through updated wills, enduring powers of attorney, shareholders’ agreements, insurance and family governance.
Typical outcomes
Agreements in family business mediations often go well beyond what a court could order:
- a buy-out of one branch of the family over time, funded from business cash flow;
- a new board or advisory board, including independent members;
- clear rules on employment, pay and dividends for family members;
- a succession timetable for the founding generation;
- a family charter or constitution, regular family meetings, and financial education for the next generation so they are ready to take on stewardship of the family’s wealth. See family constitutions for Chinese family businesses;
- updated shareholders’ agreements, trust deeds and wills to give legal effect to what was agreed.
From my own experience
I am a second-generation member of a Chinese-Australian family law practice, and I have worked in other family businesses, so I know the tensions between generations from the inside. That experience helps families feel understood, and helps me see past the immediate argument to what each person really needs. See my Chinese-Australian family background and family business renewal and succession.
How we assist
I mediate disputes within family groups and family businesses in English and Mandarin, in person or online, and work with the family’s accountants and advisers to put agreements into effect. Our firm never acts for a party in a matter I mediate. See also how I mediate.
Frequently asked questions
Why are family business disputes harder to resolve than other commercial disputes?
Because they involve both the business and the family. The same people may be shareholders, directors, employees and relatives, and grievances from one role often appear in another.
Can a mediation include several generations of a family?
Yes. Large family mediations are often run in stages, with separate sessions for different generations or branches before everyone meets together.
What can a family business mediation achieve that a court cannot?
A mediated agreement can include buy-outs over time, new governance structures, employment rules for family members, succession timetables and a family charter, none of which a court would usually order.
Does the firm act for any family member in a matter Justin mediates?
No. Our firm does not act for any party in a matter in which Justin is the mediator.
Chua Tan Associates advises families, executors, trustees and their professional advisers on estate planning, estate administration and estate disputes, in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice. Victorian law unless stated otherwise.
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