How To Survive A Breakdown

SME partners need to plan carefully when a personal relationship sours

A relationship breakdown, especially where children are involved, creates trauma and it can also put strain on your small business.

It seems many SME owners must cope with a breakdown annually. Family Business Australia research shows there are more than 1.4 million family businesses in Australia. Meanwhile, the Separation Guide shows a 314% increase in the number of couples considering a separation during lockdown, of whom many presumably own an SME.

Play on or sell up

Craig West, the founder, and chief executive of Succession Plus, a business succession, and exit planning firm, says if the business is managed well, it should have a “shareholder agreement” covering the eventuality of a personal relationship breakdown between business partners. A shareholder agreement also covers other aspects of the business, including its funding, structure, management and direction, the responsibilities and obligations of the owners, and exit planning.

West says the shareholder agreement should also include a buy-sell clause to cover the situation where one of the partners wishes to sell their share of the SME. “The shareholder agreement will describe what happens if someone gets hit by a bus, gets divorced, or gets seriously ill,” he says. Yet he estimates that only 20% of SMEs have shareholder agreements.