By Gary Deans, head of ‘Family First’, KPMG in the UK
News concerning one of the most famous family businesses in the world broke recently when it was announced that Rupert Murdoch and his wife, Wendi Deng, are to separate. In this case, it looks like plans were in place from the outset to consider how the family business might be affected in the event that it was not a ‘happy ever after’ story.
Reports in the press have highlighted the pre-nuptual agreement entered into before the wedding and, in particular, the fact that shares are held in trust for the Murdoch children. Care has obviously been taken to protect a key family asset – the shareholding – from divorce proceedings and this is sensible planning from a wealth preservation perspective. I suspect this strategy goes beyond wealth preservation however. Many families want to ensure that shares in the business interests are held only by family members (a “direct descendants” rule is not unusual) and, very importantly, want to ensure essentially personal matters such as a divorce do not interfere with the business.
But often family businesses don’t factor in worst case scenario planning amidst the excitement, joy and happiness that accompanies a wedding. And that can lead to major complications in the event of a subsequent separation and divorce.
It is understandably difficult to keep personal and business matters apart, and in fact the strength of many family businesses is underpinned by that potent mix of personal commitment and business excellence. The most successful – and long lasting – family businesses plan therefore for events such as divorces and have clear policies on share ownership, how to value the interests and so on. You can’t plan away events, but it is certainly sensible and I would argue esssential to plan how to deal with them something that I suspect the Murdoch family have addressed in detail.