By Brian Herd, Partner at CRH Law, our Lead Legal Professional at Heather Hill Pathways.
Brisbane Elder Law expert, Brian Herd, believes that a crucial ingredient to the success of many businesses lies in how well the business operators manage their ageing parents.
Many business people are adherents to, or even have a religious zeal for, the mantra that their success lies not in working in their business but in working on their business. In the best of all worlds that can be fine and dandy and very good advice.
However, Brian thinks he has discovered another key cannon for business success that is yet to be publicly acknowledged and is a little bit ‘out there’ in terms of conventional business wisdom. It is a case, he says, of ‘working on your ageing parents’ as much as your own business that will keep your business surviving and thriving.
Many might think that idea is a bit wild and woolly, even balmy – if so, read on.
A 68 year old widower, in good health, was the father of 4 adult children and also the sole director and majority shareholder of his family company. It turned over some $12 million last year. The children held minority shares in the company and two of them actually worked in the business and had ‘expectations’ as they say. Little did they realise that dad had no faith in the ability of any of his children to assume control of the business. If he ever got around to doing one, they were certainly not in the succession plan.
Dad also intuitively believed in urban myths. One of them was that, if he lost the capacity to make his own financial decisions, his next of kin, his children, could make them for him. How wrong he was and how calamitous was that one, apparently small misconception for the future of his business and his family.
As an adherent to the myth, he had never done anything about anticipating such an adverse event. If he had sought legal advice about it, he would have been advised that if he did not do an Enduring Power of Attorney and lost his capacity to make his own financial decisions, no one, not his children, his lawyer, accountant, best friend or neighbour could do so for him.
Just before Christmas last year, while in his office, he suffered an unexpected and massive stroke. After a few days in hospital it quickly became apparent that he would never resume his former role as the patriarch of the family or benevolent controller of the business. He was paralysed down his left side, could not speak, was partially blind and had quite literally lost his capacity to make his own decisions.
Without the presence of its controlling hand and mind, the business was now at a standstill and ground to a halt. The only solution was for someone to apply to the Queensland Civil and Administrative Tribunal to be appointed his ‘Administrator’, a person to make financial decisions for him and run the company.
This was a problem. First, because any such application would take time, what would happen to the business in the meantime?
Second, and even more disastrously, none of the children could agree on who should apply to the Tribunal to be appointed. Consequently, all four of them applied individually to be appointed in competition with each other. Needless to say, any semblance of a civil relationship between them quickly evaporated as they each engaged their own lawyers and sought to besmirch and sully the reputation of each other in order to gain some perceived advantage in their quest to be anointed by the Tribunal.
Tragically, by the time the application was heard, the business had descended so far into a black hole that it could not recover. The bank called in the Receivers and the business was liquidated.
There is nothing mythical about this story. You might initially think that the fate of this family and its business was down to the rampant guerrilla war that went on between the children. In reality, that was just the symptom of a larger disease – Dad’s failure to ensure he had this base covered in the first place by simply putting in place an Enduring Power of Attorney who could have come in to the business immediately the crisis occurred and even, perhaps, saved it from destruction and the family from implosion.
There is a well-known but sadly ignored adage – ‘Life is uncertain, eat desert first.’ Trouble is, most of us can subconsciously accept the truth of that fear but few actually consciously act to address it.
A new year is often a trigger for families to reflect on the past and project to the future. Brian suggests that, amongst their personal resolutions, families would do well to come up with a collective resolution to confront some future fears. One of these fears is the future of the family business if the guiding hands, such as mum and dad, have not put in place some basic legal devices to ensure and ‘insure’ its existence against the ravages of life’s uncertainties.
Maybe we should even think about wrapping our cheers and fears in a special post-Christmas gift to our parents – arranging for them to have their own Enduring Power of Attorney done – we will even gift wrap it for them.