International family businesses: Legal pitfalls and solutions

Succession planning

One of the most critical phases for any family business is the transition to the next generation. A well-structured succession plan can prevent conflicts and ensure business continuity. 

Key legal tools include:

• Shareholders’ agreements, which define voting rights, dividend policies, and exit strategies for family shareholders;
• Wills and trusts, which prevent inheritance disputes by clearly outlining ownership transfers; and
• Governance structures that establish advisory boards or family councils to separate management from ownership.

The legal landscape varies by jurisdiction. In civil law countries, forced heirship rules may restrict how business shares are transferred, while common law jurisdictions offer more flexibility. Cross-border families must carefully navigate these differences to avoid unintended consequences.

Resolving disputes

Family businesses are particularly vulnerable to internal conflicts, often arising from succession issues, unequal profit distribution, or strategic disagreements. Unlike disputes in non-family corporations, these conflicts tend to be more deeply personal and can threaten both business and family relationships.

Legal mechanisms to manage disputes include:

• Mediation and arbitration: Preferred in many jurisdictions for their confidentiality and flexibility. Arbitration clauses in shareholder agreements can prevent public court battles;
• Buy-sell agreements: These ensure a structured exit strategy for family members who wish to leave the business; and
• Deadlock resolution clauses: Useful in cases where family shareholders have equal voting rights, preventing corporate paralysis.

International considerations

When family members reside in different jurisdictions or the business operates globally, additional legal complexities arise. Recognition of foreign wills, taxation on cross-border inheritance, and enforcement of dispute resolution clauses require careful planning. Legal advisors must ensure governance documents are aligned across jurisdictions to avoid conflicts.

Conclusion

A proactive legal strategy is essential for safeguarding both the family and the business. Clear succession planning, well-drafted agreements, and effective dispute resolution mechanisms can mitigate risks and promote stability. Given the cross-border nature of many modern family enterprises, international coordination is increasingly crucial.

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Nico van der Peet is the head of Thuis Partners’ business law and corporate litigation department. He counsels on corporate structures, participations, and joint ventures. His activities include litigation relating to shareholder disputes, decision making, and liability.