Murdoch’s failure to give eldest son control of media empire turns spotlight on questions of succession

Rupert Murdoch’s failed attempt to give his eldest son control of his media empire brings into sharp focus questions of succession (and of power and control) that arise in any business, not just family businesses.

The court case saw the 93-year-old media mogul reportedly blocked in his bid to change his family trust, which gives his four oldest children equal voting power after his death. A court commissioner ruled that Mr Murdoch, and his son Lachlan had acted in ‘bad faith’ and called their efforts a ‘carefully crafted charade’ designed to ‘permanently cement’ Lachlan’s control.

The legal case reportedly began when the Murdoch children watched an episode of HBO drama Succession, which sees the patriarch, played by Scottish actor Brian Cox, leave family and business in chaos after his death.

Holmes Mackillop director and Head of Corporate Ralph Riddiough said that the story raises the questions of how business owners can choose their successors from beyond the grave and points out that the surest way of dealing with this is to oversee the process of handing over the reins during life, though many business owners choose to keep working and to remain in control for as long as possible.

“Any business that has a management tier that can step up and purchase (or inherit) the business to take it forward is in a fortunate position – this can be a kind of Holy Grail that is notoriously elusive,” he said.

“If a company has only one director, this creates a risk that sudden incapacity or death leaves the company rudderless. Where possible, businesses should consider having a second director to guard against this scenario.

“If leaving shares to a family trust on death, make sure Wills are up to date and, crucially, make sure the Articles of Association of the company allow shares to be held in trust – these changes can be made without difficulty.”

Riddiough advises that if the company has more than one shareholder, consideration must be given to ensuring that, on the death of a shareholder, the shares end up where they need to be (most likely bought back by the company or bought by the other shareholders).

“This can be achieved through carefully drafted shareholders’ agreements and, in companies where there is significant value, insurances and cross options can be put in place to provide the necessary funds,” he said.

“Generally, the default position is that the remaining directors can refuse to transfer shares to spouses and children etc and while this might sound harsh, it recognises the reality that, in a private company, it really matters who owns the shares.

“In such companies, the principle is usually that to have the benefit of owning shares, a person needs to be working in the business, and the truth is that spouses and children are often not interested or capable of working in the company.”

ENDS

For further information please contact on Ralph Riddiough on tel 0141 226 4942