Family-owned firms sit at the heart of the local economy. When a business owner wants to exit, falls ill or dies, the absence of a succession plan could lead to significant difficulties.
Television gave us Logan Roy in Succession, the founder who refused to name an heir and left his children to fight over the wreckage of his empire. Most Northern Ireland businesses do not have a Logan Roy problem, but a local family business can face the same issues on a smaller scale with fewer resources to mitigate the damage.
The local picture
Enterprise NI estimates that Small to Medium Sized Enterprises (SMEs) in Northern Ireland account for approximately three-quarters of all private sector income. Within this, many SMEs will be owner-operated. The real world consequence of this means that there will be always be a tension between “getting on with the job” day-to-day and planning for the future.
Indeed, a June 2026 snapshot survey by Employee Ownership Ireland found that while 67% of the 100 businesses surveyed had considered succession planning, only 8% had actually documented plan. It is acknowledged this sample is small this does point to a prevailing risk in the sector of failing to plan for the future.
What actually goes wrong?
1. Sudden death or incapacity leaves nobody in charge. Without a valid power of attorney or a clear plan, in a small business no one may have authority to sign contracts, operate accounts or deal with lenders, some of whom will hold personal guarantees.
2. Tension between personal and business planning. Estate and succession planning should work in tandem to ensure consistency. If there is no will, or one that predates the current business and family, shares in the business may pass to beneficiaries who may not have been considered as successors to the owner under existing governance documents. This may also leave a power vacuum as to who can drive the business forward and some family members who feel unfairly treated may bring claims for reasonable provision against the estate.
3. Deadlock and disputes end up in court. Equal shareholdings between siblings, with no shareholder agreement, no valuation formula and no exit mechanism, are a familiar source of disputes. If the relationship between the shareholders breaks down, the result is often an unfair prejudice petition or an application to wind the company up in the High Court. Both are slow and expensive, and value can drain out of the business while the dispute continues.
4. Staff, customers and lenders lose confidence. Uncertainty about who is in charge is noticed quickly by employees, key customers, suppliers and banks. Without strategic succession planning there is a real risk to jobs, skills and long-term business resilience
5. A forced exit costs more. A sale under pressure tends to achieve a lower price and less favourable terms, and buyers apply a discount to a business that depends on one person.
An illustrative scenario
The contractor. A founder aged 66 owns 100% of a Mid-Ulster civil engineering firm worth £5 million. His will pre-dates the company's growth and splits everything equally between three children. Two children work in the business, one lives abroad. After the sudden death of the founder, the bank reviews the firm’s credit facilities, a major contract stalls because nobody can sign it off and the customer’s confidence in the business has drained, and the child who isn't involved in the business wants cash not shares. A substantial tax bill also falls due at the same time.
What to do about it
Plan Early, Review Often
- Decide early who will own the business and who will run it. They are not always the same people.
- Put the paperwork in place: an up-to-date will, powers of attorney, and articles and a shareholder agreement that deal with death, incapacity, divorce, valuation and exit.
- Fund it. Life cover and cross-option arrangements can pay for a buyout without draining the company.
- Seek tax advice for each route, whether family succession, management buyout, employee ownership or third-party sale – what works for your business?
- Talk to the family while the owner is well. Written governance, such as a family charter or independent directors, helps keep disputes from becoming business problems.
- Review regularly. A plan made before the April 2026 budget changes should be revisited now.
Final thought
The owners who plan don't do so because they expect the worst. They do so because it protects the people who depend on the business: the family, the staff and the customers. Given the recent changes to tax reliefs, the cost of waiting has gone up.
John McElrone, Partner, Corporate & Banking, Elliotts Legal. This article is for general information only and does not constitute legal or tax advice.
