Law for Family Businesses

Profile

 

The research and teaching area “Law for Family Businesses” represents the research pillar “law” in the interdisciplinary research concept of the Witten Institute for Family Business (WIFU) and in the Faculty of Economics. It is funded by the “Stifterverband für die Deutsche Wissenschaft”.

Research focus “Law for Family Businesses”

Germany wide hitherto unique is the focus of the research and teaching area on the topic of law in family businesses.

Family businesses are not only the backbone of German economy – but rather the German economy themselves: almost 95% of the approximately 3.2 million companies in Germany are family businesses; i.e. companies whose shares are predominantly in the hands of one or more interrelated families. It therefore does not depend on what legal form the company operates under. Whether the family exercises its influence on the company strategy through a seat in the operative management, in the supervisory board or simply on a shareholder level won’t play a role either.

If family enterprises are tried to be divided into different groups, one has to proceed according to the respective interest. In this respect, the formation of case groups with specific problems is appropriate. If, for instance, the company organization or corporate governance of these family owned companies needs to be systemized, a classification into the categories “single owner company”, “(clan) family business” and “family-operated” or “third-party managed” business makes sense. If, on the other hand, a systemization regarding the financing policy is needed, the following classes are far more suitable: Founders of services and technology-oriented businesses, smaller companies (such as larger craftsman’s establishments and smaller commercial enterprises), medium-sized and large family businesses with the capability of entering the capital market. The first group is particularly important to the economic sector, because it attracts highly creative top performers, though it is less important for the general labour market. The second group is mainly active on regional markets. However it is of great importance to the local labour market. The last group is the “champion’s league” of German family businesses. Here, a great number of hidden champions can be found, for which Germany is uniquely known worldwide.

Family enterprises rest on two pillars: the family and the business. Both these fields have been subject to continuous change over the past years. As a result, the notion of family businesses continues to receive increasing scientific attention. Compared to public listed companies in the DAX, family businesses have an entrepreneur, not just a manager.

The entrepreneur in a family business always has three roles: Being the strategic manager, the owner and a family member. In this respect, he is also affected by law quite differently from the “just manager”. Inheritance tax, right to a compulsory portion, divorce laws etc. have different effects on entrepreneurs and managers. In the case of the former, the company is always affected as well. The research and teaching area “Law for Family Businesses” is therefore concerned, in particular, with the intersection of law, which affects both business and family alike, such as corporate succession or the ideal configuration of shareholder structures. Nothing perishes the value of a family business like conflicts in the family. Conflict is the largest value-destroyer in family businesses. Therefore, special attention is paid to the instruments of conflict prevention and dispute resolution. Regarding the succession, continuity is a high value in family businesses. However, as younger generations’ life-plans have become increasingly heterogeneous, the spectrum of possibilities for the implementation of a succession has increased as well. It is one of the core objectives of the research and teaching area to research scientifically the myriad of ways of implementing the change of generations in family businesses, and to provide assistance in following up on them.

 

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