The stresses of running a farming business can be significant, causing friction in many households and often contributing to communication failure, confusion, and resentment. Brexit uncertainty, volatile commodity prices, unpredictable weather patterns, changes to subsidies, along with a competitive economy, all add to the pressures of running a farming business. This in turn can lead to fractures in the cohesion of farming families. Without a logical framework and efficient communication successfully to assess the risks of things going wrong, misunderstandings and unexpected events can quickly spiral out of control and become costly later down the line.
Strategic planning and frequent family meetings can be an excellent investment and often leads to greater performance. The most significant communication challenges confronting farming families might be:
- Planning for business succession and inheritance.
- Handling generational divides.
- Managing the perceptions of family members who do not farm and making things fair between all parties.
Without any kind of systematic solution, it can be hard for farming families and individuals to cope with these challenges. Here are a few examples of problems that can occur:
- If there is a will but only one of the children is an executor, they may indulge in self-dealing at the expense of the other siblings.
- Siblings may differ about how to manage the family farm, and one or more siblings may try to drive the others out. They may also fail to pay a fair market share to a withdrawing sibling.
- A family member in charge of accounting may fail to plan for or pay taxes. As a result, the beneficiaries lose part of their share.
- One sibling may persuade an elderly parent to exclude the other children from the inheritance (for that sibling’s benefit).
Other disputes can occur as a result of marriage and divorce, trust administration issues, valuation conflicts, disagreements about options to buy land, and partnership or company dissolutions. All of these situations necessitate the assistance of competent and experienced advisers.
Large agricultural companies and cooperatives hold routine management meetings and handle risks pro-actively through a variety of formal documents, and many family farms might prosper from following this approach. A structured family meeting known as an Annual General Meeting (AGM), which should be presided by an independent individual, can help farming families have a clear vision for the future.
These all-family gatherings should take place at least once a year, or more frequently if there are specific conflicts or large tasks underway.
The independent individual, who may be your accountant, tax adviser, solicitor, investment manager or financial planner, is analogous to a nonexecutive officer. They are there to provide the relevant technical detail and advice on the matters being discussed, but also to be a trusted voice of mediation in situations where there are tensions between family members. This individual should be someone who has experience working with farming families and understands the pressure points they might encounter.
The aim of these meetings is to determine the guidelines for the family in terms of their relationship and the farming business. This might include discussing topics such as: family beliefs, succession, tax planning, investments, education, recognising and managing risks, voting on issues, dividend or drawings policy, employment policy, code of conduct, exit strategy and expulsion, and conflict resolution.
These meetings will provide an opportunity for individuals, especially the younger generation, to address their business goals and ambitions. It could make those in the family who want to keep the farm going think about how their input can help reach the objectives they seek. These discussions might also help to engage family members who might have become disillusioned or disconnected from the farm and allow them to voice any concerns. Any potential difference can be brought into the open rather than being left to ferment. The whole process should draw family members of farmers and non-farmers closer together and ensure the longevity of the farm.
The aim of the AGM is not to tackle all of these issues at once, nor is it to tick an issue off the list and never revisit it again, but with regular meetings over time to gradually build an understanding and ensure that all family members are on the same page. When disagreement happens, there will be a defined mechanism for coping with it, and the aspirations of the next generation will be well known. A farm owned by a family that collaborates and interacts effectively is frequently more prosperous and successful at maintaining family wealth for future generations.
At Churchgates, we have several experienced individuals who can provide independent advice on a wide variety of topics, including accountancy, tax, investment and legal. We offer a joined-up service, with much of our expertise being offered in house by our accountants, tax advisers, solicitors, investment managers and financial planners. We have a long history of working with farming families in East Anglia and beyond, many of whom we help with their AGMs.
Churchgates are devoting the week commencing 14th June to all things farming in collaboration with a number of local land agents, agricultural consultants and banks. The Churchgates Farming Week will include live webinars on farming-related topics and opportunities to book free consultation sessions with experts. Please visit our Farming Week page for more information or call 01284 701271.
