When a business owner dies without a succession plan, everyone is thrown into turmoil
Q: I work for a very small luxury travel agency that was already suffering due to the COVID-19 pandemic. The owner of the company recently passed away, and we are heartbroken and completely freaked out. No one has been named next in command, and his family wants nothing to do with the business. We don't even know if we'll be paid out from the accounts. Also, quite a few trips are still booked in the coming months for clients who have zero idea what's going on, and we don't know what we're allowed to tell them. We want to help ensure our travelers still get to go on their trips, but of course we can't work for free and will eventually need to find other jobs to pay our bills.
Can the company continue without its owner? What is the standard next step when something like this happens? It's weighing on our consciences, and we know the owner would never have wanted to leave these customers high and dry.
A: If starting a business is about making a name for yourself, succession planning is often about whom you trust to carry on that name. But more than that, succession planning is "a continuing responsibility that you owe to employees and customers," says Declan Leonard, attorney and partner at business law firm Berenzweig Leonard. As you're seeing, even owners of small businesses "can really impact a lot of lives by not taking this responsibility seriously."
The good news, Leonard says, is that even if your late boss's family has no interest in running the business, "everyone's interests are aligned" in dispensing with it quickly and properly: "Employees want to get paid; clients want to know if they're going to receive their services, or if a refund is in the works; and the heirs' inheritances are in jeopardy if they don't do this right."
According to Leonard, your late boss's business would be considered an asset of his estate; the executor or administrator of the estate has a fiduciary duty to preserve the value of that asset for the heirs, so "letting [the business] go down the tubes would be a dereliction of duty to the family, not to mention employees and clients." And whatever the final decision -- step in, sell or shutter -- the best way to ensure a smooth transition with minimal disruption and cost would be to keep current employees informed and involved in the process.
If your late boss did not retain an accountant or lawyer for his business, Leonard recommends you find out who is representing the estate so you can "go into collaboration mode" with that person. If the only way to get that information is from the bereaved family, you and your colleagues should nominate one person who can handle the situation with diplomacy and empathy. That person should explain that you all want to ensure your actions and client communications are consistent with how your boss's family wants to handle the business. (You are, of course, also concerned about receiving the pay you're legally entitled to, but there's no need to harp on that point to still-grieving family members at this stage).
Meanwhile, Declan adds, you may want to collectively hire an attorney who can advise your group on your rights and obligations and who can serve as a single point of contact between you and the estate -- and maybe apply leverage as needed.
Above all, until you receive direction on how to support the business, you should shift your focus to supporting yourself. Start your job search immediately, document all unpaid work hours, and retain copies of all client communications and contracts, in case of a dispute over back pay or refunds. No matter what happens to the business, you are entitled to be paid, but there's no telling how long that process will take.
I am sorry for your personal and professional losses, and for your grief compounded by stress and uncertainty. Here's hoping things will be resolved quickly and with minimal conflict.