Life In Transit Part 4: WILLS, ESTATES AND THE FAMILY BUSINESS
In the past three weeks, we have been following the saga of SME/ MME Family Business owner, Mr. Mbanje, and his transport business. We have looked at his company registration and the issue of contracts, outlining shareholding as well as monies borrowed and what that debt constitutes of and how it can affect a company. We also explored the hiring practices of the Family Business owner. We went further to look into the professional advice that a Family- Owned business may require and Business Crisis Management. This week I would like to continue the journey of Mr. Mbanje's transport business. As I keep pointing out, like many industries serving a billion people landscape, Africa's logistics sector holds so much potential and presents a significant opportunity for anyone willing to build their business in the industry. Millions of commuters travel every day across the continent and require transportation.
Amidst the issues our business owner was faced with (continuous business crisis situations emerging from all angles), Mr. Mbanje begins to suffer from stress related health problems that cause him to have a stroke. When he is hospitalised, he is incapacitated and unaware of the decisions that are being made on his behalf by his brothers. Instead of his wife making these decisions at the business, his older brother and perceived heir apparent, because he is still a co-director on company papers, starts taking over the company's day to day running. Mrs Mbanje and the Mbanje children are focused on their father’s health and wellness and assume the business has capable management. However, Mr Mbanje’s hiring strategy, or lack thereof coupled by his micro-management style has left the company employees unsettled and leaderless. This vacuum has led to Mbanje Snr imposing himself as management. This is done without the immediate knowledge of the family who owns the business. The only thing that jeopardises Mbanje Snr’s intentions is that the signatories to the company bank accounts are Mrs. Mbanje and members of staff who happen to be her brothers. When Mr. Mbanje eventually awakens in the hospital and finds himself struggling to recover, this situation scares him. His wife was making his medical decisions as she is the duly noted next of kin; however, if anything were to happen to leave them both unable to operate, those decisions and roles would remain unclear. Upon recovery from his stroke, Mr. Mbanje decides to consult with his lawyer and creates a will. He believes a will is a sufficient enough instrument to help him to protect his estate and his company for his children. In this will, he states that each of his living sons should get an equal share of the buses in the business in the case of his demise. He believes that girl children get married and that another totem and family cannot share his family wealth. This leaves his daughters disempowered and financially exposed if he were to die suddenly. He also decides on the share allocation of the other businesses without consultation or thought. His decision is made in a haphazard manner where he divides up the portfolio like a cake.
Moreover, in making this decision, he has not considered his grandchildren, who may be bourne of his daughters as much as those bourne to his sons. Also, to his knowledge, which he has successfully kept hidden from his family, are two other children whom he has had with two different women outside his marital home.
As he is growing older, Mr. Mbanje is dismayed because out of his three sons from his marriage, only one did well in school and seems more level headed than the other two. The problem is that this son (Hatineti) is the youngest of his children. Mr. Mbanje feels that this situation puts Hatineti in a weak position. He feels that his two older sons are irresponsible with money, and their decisions are frivolous. Mrs. Mbanje, however, shields the older sons and forces Mr. Mbanje to invest in their business ideas. The girls, although older than Hatineti, are also spoilt by their father (who feels the guilt of not leaving them any buses or businesses in his will). The girls prefer living in Europe with little to no interest in the family business except receiving monies to keep up their lifestyle.
The other two "unknown" children seem to have a better potential in being able to manage the business but acknowledging them to Mrs. Mbanje may cause major turbulences and the whole situation is a great source of embarrassment for Mr. Mbanje, although he loves these children as they are his and he wants to ensure they are catered for. He feels that he is seen as a dutiful, loyal husband and is well respected in his community. He doesn't want to lose this reverence and decides instead to hide this situation from his family with the hope that it will only be revealed by his will long after he has passed.
Family Businesses are complex. Estate and succession planning cannot be overlooked when creating strategic plans for these businesses. Also notable is the complexity of the cultural and traditional roots of the business. It must always be kept in mind that the family is the reason for the business and it must come primary in all decisions. In this case it what would Mr. Mbanje need to do?
Here are possible options:
Review company registration and make it in line with his family goals.
Create a family charter that directs decision making in the business. This involves creating multi-generational dialogue and engaging in constructive communication.
Utilise the family charter to guide the family in it's decision making for the business as well as personal affairs.
Make the charter inclusive of all family members. Some members of the family may not be involved in the running of the business but their interests must be addressed.
Set clear goals for the family and the business. Allow these goals to guide the decisions pertaining to succession and wealth management.
Start grooming his possible successor through professional as well as personal channels.
Create a holistic estate plan that is in line with the family goals and his legacy.