Conflicts of Interest when Representing a Family Business?

By
May 20, 2014

I recently spoke at the State Bar Business and Real Estate Transactions Institute on the topic of conflicts of interest when representing a family held business. This is a very difficult area because of the potential for conflicts between the individual clients and the business entity. The representation is made even more difficult because the individuals expect the company to pay for the representation even though the lawyer is providing advice for the individual that benefits the individual and not the corporate entity. Many times, the representation has a common interest and the parties are not adverse this requires careful review of whether there is adversity in the representation of the corporate entity and the representation of the individual owners. Lawyers need to look beyond the specific question being asked to make sure that the advice to be given is not creating a benefit for one party to the detriment of the other party.

It is always best that the lawyer be open about the potential for adverse consequences and make sure that the individual client understands that the lawyer is providing advice in relation to representation of the corporate entity. In some instances, it may be necessary to obtain a waiver of conflicts of interest after the lawyer has clearly explained that there are interests relating directly to the individual and interests relating directly to the corporate entity that must be considered.

Lawyers must be very careful to ensure that they are not violating the conflict rules when representing a family held business and individuals from the family held business.

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