Surprisingly, over 50% of all companies in the U.S. are actually family-owned businesses. If your company is doing relatively well, solidifying appropriate succession plans for the future can reduce downtime and uncertainties in the company in the event of a death. Large family businesses tend to have several successors in line. Most of the time, responsibilities will be divided among several successors upon the death of the company owner. These terms and conditions are often outlined in shareholder agreements. These three provisions should be discussed when planning and determining which individuals will succeed the family business.

Non-Competition and Non-Solicitation from Departing Shareholders

If the family business is to be divided among several family members or shareholders, not everyone might be happy with the decision that has been made. Even if they are, plans change in the future, and some shareholders may be offered better deals and positions elsewhere. To protect the family business, include non-competition and non-solicitation provisions in the shareholder agreements for departing shareholders.

Confidentiality Agreements to Deals

Family members who were in line to succeed the family business may have already put in a significant amount of effort and time into the company. Due to this reason, they may be privileged to the details of many private dealings within the company. Locking down family secrets during a vulnerable time when there's doubt as to who will succeed is important and can be accomplished by including confidentiality provisions within the shareholder agreements. This prevents your successors from using company secrets or confidential information to improve their position within the company or be used as an asset to move to a competing company.

Restrictions on Share Transfers

Most company owners want to continue to keep the family business within the family. To ensure this, include provisions that outline restrictions on share transfers. Successors that plan on staying with the family business will be first in line on any shares that are being sold by departing successors. This not only keeps the company private but also ensures that shares won't be leaked to outsiders.


Don't let fear of death prevent you from planning for the future. If you haven't already determined who your successors are and outlined the roles and responsibilities for those wishing to succeed in your company, make an appointment with a family-business succession-planning consultant as soon as you have the time to draft up a shareholder agreement that meets your needs.