Inheritors Be aware of future assets....

VICKI TEMKIN, a lawyer in suburban Los Angeles, inherited a few pieces of property when her mother died in 1999. But she was also left with the responsibility to clean up several acres of land that had been polluted by tenants over the decades.

She spent the better part of the last decade and about $1 million in cleanup fees, and that does not count the additional $1 million or more in lost rent.

"No one was happy about having to clean it up," said Ms. Temkin, who, with her sister, inherited half of the property. (The other half went to the children of her father's business partner.)

Inheriting any property is more complicated than receiving securities or cash. If it is a family home, sibling rivalry can wreak havoc. If it is an income-producing apartment or commercial space, someone has to manage it. Or some heirs might want to cash out their share.

But inheriting contaminated properties, even if the deceased owner had nothing to do with polluting the land, is in a category all its own. Known as "toxic succession," a property passed on with environmental liabilities could end up costing the inheritor more than it is worth.

Kevin Daehnke, a senior partner at the Daehnke Cruz Law Group and an expert in toxic succession, said the best remedies needed to be taken before the property is left to an heir, but most of the time no one knows the liabilities are there.

In Ms. Temkin's case, the contaminated land had originally housed a gas station but had also been leased to a chemical manufacturer and a storage facility. She said it had been a major source of income for her family until about 2003, when a buyer approached her. As part of the deal, she had to get an environmental report, which turned up serious pollution.

The buyer walked away, but she and the other owners were put on notice to clean up the property if they ever wanted to sell it. (She declined to specify the city other than to say it was outside of Los Angeles.)

"We decided we'd just rent it and take the loss and not sell it," she said.

But the amount she could charge in rent was half what it had been, since the tenant could not use the contaminated part of the property.

When another chance to sell came their way in 2006, Ms. Temkin and the other owners decided to take it and clean up the property. That took until 2013. In addition to the cleanup costs and lost rent revenue, she said, they had to accept 25 percent less for the two-acre parcel.

And even though they received a certificate from the city saying the case was closed, Ms. Temkin said she and her partners could still have to do more.

"If pollution should be discovered in that area, we're on the hook to clean it up," she said. "I don't think any of us realized we'd be on the hook for life, no matter what. I don't know if we'd have agreed to sell it if that had been known to us."

In this instance, at least, Ms. Temkin's parents and then she and her sister — not to mention the other half of the partnership — benefited from the property for three decades.

That is not always the case. Sarah, who agreed to talk on condition that her last name be withheld because she fears future litigation, inherited a piece of property in Southern California when her father died in 1986. She was 18, and the property and other assets were held in trust for her benefit. The next year, the trust cleaned up the property, which had a dry cleaner on it, and sold it.

But then, 25 years later in 2012, Sarah was named in a lawsuit claiming that residual contamination in the soil had sickened dozens of people who worked in a building constructed on the land. Her mother was named in a separate suit.

"They said the toxic waste had percolated through the ground water and caused all kinds of diseases," said Marshal Oldman, a trust and estates lawyer who had worked on behalf of the family. "It was a fishing expedition."

It may have been. But Sarah said responding to the suit cost her more than $500,000 in legal fees and two and half years of worrying about the suit's validity before a court dismissed the case. She estimated that her mother's legal fees were double what she paid.

"I felt bad for these people, but I didn't do it," she said. "I was being punished for the sins of my dad. It's frustrating. There was nothing I could do."

And in this case, Mr. Oldman said, it was the tenant, not Sarah's father, who had polluted the land.

Mr. Daehnke, who also worked on the case, said such lawsuits were more common than it might seem, particularly when plaintiffs identify what they think is a deep-pocketed former owner — in this case Sarah's trust.

In instances of environmental contamination, any one in the chain of title can be held liable. But those without any money essentially are skipped. The people who have the means can then be sued and will ultimately pay for the cleanup.

"Even if someone only owned 5 percent of the property, they're still liable," said Canaan Crouch, an environmental engineer and a partner at Landmark E&S Insurance Brokers. "You could be responsible for 100 percent of the cleanup if you're the only viable economic entity."

Still, these properties were contaminated, and someone needs to pay to clean them up. While that cost varies from tens of thousands of dollars to millions, the issue for many inheritors is how long someone can be held responsible for the damages.

If the property is thought to be contaminated, there are several solutions, Mr. Daehnke said. It could be sold in the owner's lifetime, since any future liability would end with that person's death. Or it could be put into a separate trust with a corporate trustee to administer it. That puts distance between the beneficiary and the person suing and limits a litigant's access to other assets.

If the severity of the contamination is known, Marty Babitz, senior resident of the Hawthorn Institute, which is part of PNC Family Wealth, said the easiest solution might be for the inheritor to disclaim the property. Everyone else in line to inherit could do the same and the property would end up going to the state.

"I'd have nine months to ascertain if the property might be more trouble than it's worth," Mr. Babitz said.

Yet most of the time, contamination issues do not become known until someone tries to sell the property and an environmental test is ordered.

Once the contamination is found, there is insurance to cover future liability, even in cases that might seem uninsurable. Mr. Crouch pointed to a plant nursery in the San Francisco Bay Area where heavy metals were found in the soil and a nearby stream. The owners paid seven figures to clean it up before selling the land to someone who wanted to put a preschool on it.

"The location was important, so the buyers stuck in there," Mr. Crouch said.

Given what is on the land now, it is not hard to see how some parent might sue the preschool or the land's previous owner. So the previous owners bought an insurance policy to cover such possibilities as the environmental regulator reopening the case or someone suing the previous owners for missing a spot in the cleanup or saying there was pollution on an adjacent property that harmed a child.

"It all comes down to money," Mr. Crouch said. "Unless there is some sort of money at risk, 9.9 times out of 10, people have no concept of environmental issues."

And not paying attention to those could turn a windfall inheritance into a money pit.

Source:http://www.nytimes.com/2016/02/20/your-money/contaminated-property-makes-for-costly-inheritance.html?ref=topics
 

Interesting read from the Australian Business Review:

There's more evidence to show women are assuming important leadership positions for family businesses all around the world. It's a welcome development, and another sign that family business continues to be a wonderful engine for social change.

A collaborative study by Kennesaw State University and Ernst & Young found that global family-owned or controlled businesses have a far higher percentage of women in leadership positions than other types of companies. Results were published in Fortune magazine in July last year.

Private businesses were only eligible for the survey if the family controlled at least 50 per cent of shares and voting rights. The focus was large and broad: 25 of the largest family businesses in nearly two dozen large global markets, with the average firm bringing in $US3.5 billion in sales ($A5.09bn) and boasting 12,000 employees. Among those surveyed, 22 per cent of top management teams were women. It's still a small number, but it's already nearly double the 12.9 per cent figure reported in 2013.

More impressively, nearly 70 per cent of surveyed family businesses were considering a woman as their next chief executive; just 5 per cent of non-family, publicly traded companies had female chief executives in a 2015 study. The most equal boards were found in Norway (35.5 per cent female board members) while the least equal were in Japan (just 3.1 per cent).

Lesa France Kennedy is chief executive of International Speedway Corporation, the sporting giant that controls 12 NASCAR series events, and also serves as NASCAR's vice chairperson. She has recently been named the "most powerful woman in sports" by an independent panel (actually the second time Ms. Kennedy has won this distinction).

Kennedy wields influence with a soft touch and a behind-the-scenes profile. She started working with the International Speedway Corporation in 1983 immediately after earning degrees in economics and psychology from Duke University. "She has the ability to marshal people and resources in a very effective way," brother Brian says of Lesa.

Emma Hill: 30 years of jewellery, romance and soul

Closer to home in New Zealand, international jeweller Michael Hill International recently announced that Emma Hill will take over aschairwoman. She succeeds her father, founder Michael Hill, and received support from independent members of the board after the announcement.

There had been some concern about the chairmanship being passed on to the family, particularly a daughter. To his credit, Michael Hill took those concerns head on, saying "it's important to keep the company going as a family business so it's not a clinical, big business without romance and soul".

Emma Hill's story is familiar to those who follow family business successions. She worked within the company for years, often under the direct tutelage of her father, to be groomed for leadership. Her career in jewellery now spans more than three decades, starting as a floor worker when she was a teenager. She had previously served as deputy chair in 2011. The Hill family did it the right way.

Sabrina Chao: third-generation daughter and proven executive

While Emma Hill took over Michael Hill International in an organised and planned succession, Sabrina Chao of Hong Kong-based Wah Kwong Maritime Transport Holdings had a much rougher transition. Operational responsibility for the company passed to her in 2010 when, at the young age of 30, Ms. Chao's father suffered a stroke. Living in a culture steeped in traditional, male-dominated Chinese values, Chao had to prove herself from the get-go.

In January 2013, after years of profitable stewardship, Chao was named chairwoman of Wah Kwong's board. By that time Wah Kwong had 30 ships and $200 million in revenue. She has already navigated several downturns in regional and global shipping markets by sticking to the basics and not trying to shine too brightly at once. "It's been about having the right assets and the right customers," says Chao. "Most importantly, it's about having the right people and focusing on the detail at every level of the organisation."

Looking forward: female leadership in Australia

While Australian politicians and big business grapple with reasonable representation of women, family businesses are leading the way. The NSW Bar Association published a report in January about the NSW Labor Party, finding it rife with misogyny, sexism and harassment. The report included that "there was a tendency to give women a chance when everything else had gone wrong."

Women, by contrast, are taking the lead role in family business. As I've pointed out before, family business structures benefit women and women benefit family businesses. Women owned 33 per cent of family businesses in Australia in 2015, up from just 2 per cent in 1994. The female leadership model is alive and growing.

Source: http://www.businessspectator.com.au/article/2016/2/12/economy/why-female-leaders-thrive-family-businesses

Family businesses require the same kind of legal, financial, and strategic set-up as other businesses, but there are several unique issues in family businesses.

Have you ever thought how great it would be to start a business with your spouse, sibling, or best friend? Maybe you want to start a business that can provide for your children after you retire. If so, you've probably imagined fun days at the office together, brainstorming over coffee or happy hour, and the joys of working with someone you care deeply about.

If you have the kind of relationship where you love spending every second together and you have complimentary skills, family businesses can be ideal. You get to work together, often travel together, and spend your days with the people you enjoy most in the world. However, even in those idyllic relationships, working together can be challenging. Here are some things to consider if you're thinking of starting a family business.

• All the traditional rules of business still apply. Whether you start the business as a hobby or expect it to provide full-time income, it's still a business. You still need legal protection, solid strategies and business plans, operational systems, and competent partners. You also need it to make money. (Nothing ruins the fun of a family business like financial worries!)
• It WILL affect your relationship. You're changing the existing dynamic of how you relate to each other, so for good or bad, you can't expect things to stay as they are. Learning to have good boundaries and nurturing your relationship outside of work are crucial for long-term success.
• Someone has to be in charge. Even if you plan to share decision-making, someone needs to have the final say. Disagreements are inevitable, and if you're going to operate a real business (as in, not just a hobby), everyone needs to know who makes the final decisions.
• Just because it's your dream doesn't mean it's theirs. You will most likely have different levels of commitment to the business. Whether one (or more) of you is supporting the other's dream, or you're all excited about the mission at the start, things change. Don't expect anyone else to feel the way you do about your business; they're not you and it's unfair to expect them to be. This is especially true if you intend your business to be the legacy you pass on to your children.
• Traditional roles (CEO, CFO, COO, etc.) may have loose or unclear boundaries. If daughter #4 is the best choice for CEO but she's the baby of the family, it may be difficult for her to manage older siblings or parents who are in support roles. Conversely, it may be difficult for the older siblings or parents to find themselves in subordinate roles.
• The learning curve may be huge. If you're assigning positions based on potential or need instead of experience and expertise, there will be a bigger learning curve. You also may find people are in positions that don't suit their skills and personalities, such as having a family member who hates accounting in charge of finance ("to keep it in the family").
• You will need time off. If business is the main topic of conversation every time you're together, you may find that you lose sight of why you enjoyed the relationship in the first place. Make sure you spend time together (and apart) pursuing hobbies and interests that are not work-related. Consider banning work talk at the dinner table or on date night (if you can!).
• Your existing baggage will be magnified in times of stress. If you've fought for years about how your brother shows up to everything late, what will happen when he shows up late to an important meeting? Instead of a simple disciplinary review, you may find yourself in the same knock-down, drag-out fight you've had since childhood. Try to leave the past in the past and focus on the present and the future.
• Mutual respect and clear communication are critical. In a non-family business you can go home and complain to your spouse about your lousy boss or frustrating employees. In family businesses, you those stressors are often at home with you. Calmly and respectfully dealing with issues when they arise (instead of letting small things build up into giant problems) helps maintain an atmosphere of professionalism that your entire company will benefit from.
• It will be fun... and it will also be hard. Have strategies in place to handle conflict, challenges, and tough decisions. If you plan for the tough times, the rewards will be that much sweeter.

Source: http://www.inc.com/ariana-ayu/10-things-to-consider-when-starting-a-family-business.html

It's just over 11 years since Sligo woman Ruth Monahan took the jump from a TV career to floristry - and she hasn't looked back since, writes Louise McBride

So it's no surprise that it is the floral displays arranged for the state visits of these dignitaries that Ruth Monahan, managing director of Appassionata Flowers, counts as those she is most proud of.

"We filled College Green in Dublin with flowers for Obama's visit - and it was possibly on the windiest day of the year," recalls Ms Monahan. "We used Irish and American colours. We also dressed the Convention Centre in Dublin with flowers during Queen Elizabeth's visit in 2011 - and we presented a bouquet to her, which was such an honour."

It's just over 11 years since Ruth Monahan and her husband Ultan started Appassionata Flowers, a creative floristry business which arranges floral displays for hotels and shops.
Before she set up the company, she was pursuing a career, which couldn't get any further from the world of green fingers, in television production. She studied communications and media at Dublin City University and multimedia at Trinity College Dublin. From there, she worked with independent TV companies, including stop.watchtelevision, Brown Bag Films and Rondomondo. But it was while she was travelling in Australia with Ultan that she decided to change her career.
"For longevity as a female, television is a very difficult road," says Ruth. "You always have to fight your corner.

"When I was away, I had a think about my career. I felt I had nothing to lose by coming back and training as a florist. So I trained in McQueen's in London and started flower school on my 30th birthday."
After working in London, she then moved back to Dublin and started to research a floristry business plan. It didn't take her long to realise that there was a huge gap in the market for design-led floristry.
"When I was doing research for my business plan, a number of restaurants asked if I could go into them because they needed someone to do their flowers," says Ruth. "So it started quite ad hoc like that.

"It was also very close to Christmas when we set up the business, so we had bouquets and so on to do. We were very lucky with the timing.
"There wouldn't have been a huge amount of design-led floristry around then. I started off doing hotels and restaurants and it built up each year."
Her first client was the Clarendon Hotel and she has also arranged flowers for The Westbury and The Shelbourne hotels.
"We were also lucky to get places like Patrick Guilbaud's restuarant," she says. "I was lucky enough to get contracts with various restaurants."
The couple ran their business from home in the early days.

"The business grew rapidly and within a year we had to move out of our cottage to a retail premises in Sandymount. After another year we expanded further, as our hotel contracts grew, and we moved to our current studio below Merrion Square. We then opened our Drury Street shop in 2008."
The company doesn't just cater for businesses, it also provides flowers for weddings, funerals and individual bouquets.
"We can cater for the smallest personal request and scale up to the largest event."

Ruth, who is from Rosses Point in Sligo, grew up around flowers.
"I was brought up with flowers and I always took a huge interest in flowers," she explains.
"I spent lots of childhood days rambling around the garden with my granny, who is still alive at 97 and who can be found tending to her astilbe and roses.
"Granny traditionally used cuttings to create her garden and has a beautiful cherry blossom tree. She was a great imparter of knowledge about botanical names and growing tips.

"She also had an avid interest in visiting gardens and her plant interest has definitely carried through her family."
Ruth grew up watching Mary Fitzgerald's arts and crafts shows on Anything Goes. (Fitzgerald, who works in PR now, was a popular children's TV presenter in the 1980s and 1990s.) "I was always creative with my hands," says the florist.
Appassionata means passion in Italian and they took the name for the company from the passion flower.
"I love the passion flower and I remember that I was reading an article about it once and felt that if we were going to create a flower business with a luxury edge, the name of the business should have a luxury feel to it."
Hence 'Appassionata Flowers'.

She cites the peony as her favourite summer flower. "The peony is such a rare bird of a flower. It still is one of the few flowers that is only available from April to July and it's the most requested flower by every bride.
"The peony rose arrives as tight as a gobstopper and then within a few days has bloomed to look like a luscious ice-cream scoop - and the scent is simply divine."
Around this time of year, her favourite flowers are frilly tulips.
"These flowers have the most gorgeous tendrils with frilly edges. When we have them in bunches for sale in the shop, they literally sell out in minutes," she says.
Ruth cites a floral replication of the Aviva Stadium as one of the most unusual displays she has put together.

"We were asked to recreate the stadium or replicate it in flowers. It looked amazing," she recalls. "We have also created flower walls by hand-pinning orchids onto moss for two days straight, made jungles and forests out of blank studios and we did a wreath of vegetables for the chef Donal Skehan."

St Valentine's Day, probably every florist's busiest time of the year, is also the one time when the company plays it safe with the flowers it offers.
"Our tray of blooms is always a bestseller as well as the bunch of 12 red velvet roses," she says. "We find that the male flower buyer is only interested in size and delivery time when it comes to St Valentine's Day flowers.
"Some gentlemen do put a lot of effort in and have us buy in their partner's favourite blooms or recreate their bridal bouquets.
"My husband, who works with me, surprised me with the most beautiful bouquet last year for Valentines. I love Yves Piaget roses and I arrived to breakfast at dawn before heading into work to see and smell the bunch he had organised."

The mother of two now lives in Dublin and the company employs 15 people. "Most have been with us a long time," she said.
Appassionata Flowers was set up in late 2004, so it has survived its first recession. As flowers are a luxury spend, they are one of the first things that businesses and consumers cut back on. But things are looking up.
"We've gone through the rollerscoaster of Ireland's economic climate," admits Ruth.
"We've noticed a return to better times within the last year and this is all down to personal spend. We did twice as many Christmas deliveries in 2015 and can't believe how many bouquets we have already produced and delivered so far this year."

Source: http://www.independent.ie/business/small-business/your-stories/from-grannys-garden-to-arranging-flowers-for-the-queen-and-obama-34449881.html

Most family-owned businesses, approximately 70%, last just one generation. Because an estimated 80% of businesses across the globe are family-owned, the low survival rate has alarming consequences. Research shows a need for improvement in areas like skills and selection, succession planning, and diversity.

Click here to read the full article on Boris Groysberg and Deborah Bell's findings: 

https://hbr.org/2014/04/generation-to-generation-how-to-save-the-family-business

Brothers Kelly and Keith Toppazzini are the owners of Canada-based Topper's Pizza, a pizza franchise their father, Ron, founded back in 1982. Over the last 33 years, their family business has expanded to 35 traditional quick-service pizzerias and one traditional location.

From a young age, both Kelly and Keith were involved in the planning, construction and operation of the the first location. Here, they share these best practices for keeping a family business thriving.

Set rules to establish culture
The right set of rules helps to cultivate the business culture family business owners want. "To cultivate a happy, successful, energetic and passionate team, all members must be in alignment and in sync," Kelly explains.

Kelly hired advisers to create "Toppazzini Rules," a set of guidelines intended to protect the entire team and preserve company culture. One of the rules is designed to promote fairness and avoid nepotism -- and there are no exceptions. For example, Kelly's daughter is graduating this year, and has to work somewhere else for two years before she can apply for a senior position in the family business.

Nurture your people
It's important as a leader to help each team member figure out how they can grow their careers. Kelly asks her employees the following questions: What are your goals? How do you want to grow with this company? Where do you see yourself in the next five to 10 years? The brothers try to operate with 100-percent transparency, which leads to trust and a sense that there is a level playing field for advancing in the family business.

Promote non-family members
Kelly explained that one of the keys to building a successful franchise system is to promote non-family members to senior roles. Hiring senior level employees at the director level is a key business strategy that Topper's is relying on to take their family business to the next level. Kelly finds that, in addition to providing new perspective, non-family leaders reduce emotionally-charged decision making.

Treat customers like family
Family businesses have a unique competitive advantage. Families who do business together want to build a legacy, which is different from just building a business to sell it. "The continuous level of care that a family brings to the business really affects your sales in a positive way," Kelly says. "Family members will always take care of the customers, which creates loyalty from customers, which in turn increases our sales overall." The Topper's team extends that level of care to the community, making it a point to partner with several charitable organizations.

Instill core values
Running a family-owned business isn't for everyone. "New businesses are tough to start and tougher to grow," warns Kelly.

Couples should start a family business if they are able to create a strong foundation of communication and trust; their talents and strengths should also complement one another.

Exposing kids to the family business is also important. Kelly's children, for instance, have worked for the company as part-time employees while going to school.

Finally, Kelly advises that business owners remain as hands on as possible. He spends much of his time shaping the company culture and communicating with the operational team. And when it comes to strategizing a plan for his business, he doesn't just leave it to chance; he travels to different locations to gather information, looking for ways to improve the products and the brand.

Source: http://www.entrepreneur.com/article/243869

According to the Family Firm Institute, a research group in Boston, only 30% of family-owned businesses make it to the second generation, 10% to the third generation, and 3% to the fourth. While all enterprises are susceptible to failure, regardless of ownership, family businesses contend with some unique issues (BusinessWeek.com, 9/26/07), such as managing succession, going public, bringing in outside board members and other executives, and keeping products or services relevant through the generations.

This article gives points from century old businesses where enterprises can benefit by borrowing strategies from these companies that have prospered generation after generation

Click here to read the full article: 

http://www.bloomberg.com/bw/stories/2008-05-14/centuries-old-family-businesses-share-their-secretsbusinessweek-business-news-stock-market-and-financial-advice

Are you an existing company limited by guarantee?

Following the recent changes to Irish Company law existing companies limited by guarantee now fall into two categories:

A company limited by guarantee and having a share capital is now automatically a Designated Activity Company.

The new company law rules that apply to this type of company are set out in Part 16 of the Companies Act 2014. Such a company has a maximum of 149 members.

A company limited by guarantee and not having a share capital is now automatically a company limited by guarantee, a CLG. The new company law rules that apply to this type of company are set out in Part 18 of the Companies Act 2014.

What do I need to do following the changes in the law?

You can immediately formally change the name of the company so that it now ends with "Designated Activity Company" (DAC) or "Company Limited by Guarantee" (CLG).

The members of the company will need to pass a special resolution to approve the change of name.

To notify the Companies Registration Office (CRO) of this name change for free, you must file the change of name by 30 November 2016 by completing a form N3 and filing revised constitution documents (memorandum and articles of association) that display the new name and a list of the original subscribers (members) of the company on its incorporation.

If you are currently exempt from including limited in your name the exemption will continue and no change will be required.

Source:

Thanks to Michelle McLoughlin at M. McLoughlin & Co., Solicitors for sharing this very useful article: 

 http://mmcloughlinsolicitors.com/latest-news/are-you-an-existing-company-limited-by-guarantee