Governance structures in African family businesses - Boodle Hatfield

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Article
08 Apr 2024

Governance structures in African family businesses

Written by

Aakash Mohindra View profile
2 min read

In a recent PWC Africa Family Business Survey, it is said that only 77% of family business leaders have some form of governance structure in place, such as shareholder agreements, family constitutions and protocols, and wills. In South Africa, 94% of family business leaders report that they have such structures in place. Whereas in Kenya and Nigeria, governance structures within family businesses are not quite as popular, with 76% and 58% of family business leaders respectively saying they have some form of governance structure in place. 

Somewhat concerningly though, it is said that only 21% of family business leaders in Africa have conflict resolution mechanisms to deal with family disputes. In Kenya, 21% of family business leaders say they have such mechanisms in place. In South Africa only 27% have conflict resolution measures in place. In Nigeria, a mere 6% of family business leaders have mechanisms to deal with family disputes. 

Whilst it is promising to see an increasing number of family businesses in Africa putting into place governance structures, the risk of family conflict can break down any structures in place if there are no measures in place to address disputes. Longevity of succession planning presents one of the most urgent threats to the survival of family businesses. When the business-owning head of a family passes away and the business is inherited directly by multiple heirs, the ownership of the business can become fragmented, creating the potential for disputes between shareholding family members. If not resolved swiftly, this can cause significant disruption to the operation and growth of the underlying business. When viewed collectively, the potential for such disputes across the many family businesses in South Africa, Nigeria and Kenya represents a threat not only to the businesses themselves but also to the wider economic prosperity and growth of the region. With both effective governance structures and dispute resolution mechanisms in place, the chance of disputes between family members will be reduced as their roles and obligations are made clear within the governance structure. 

At Boodle Hatfield, we understand the need to support family businesses, providing them with guidance during times of dispute but also providing them with practical and careful guidance. The firm has been a long-term strategic advisor to family businesses for generations, guiding families and their businesses to help achieve their commercial objectives. We provide a well-established private client legal practice serving some of the largest family businesses in the UK and internationally.

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