Succession and family conflicts
Farmer “AB1” contacted RFCSWA regarding the critical financial situation of his family mixed (wheat and sheep) farm. AB1’s two adult sons (“AB2” and “AB3”) were farming with him.
The ABs had not been able to access additional finance for the current year, so no working capital was available to put in a crop.
Counsellor arranged an initial meeting with three ABs. None of the female family members wished to attend. Meetings were held over 12 months.
The initial meeting reviewed the overall business position and considered what options each of the ABs thought might be available.
There was a high level of stress between the brothers, AB2 and AB3. One was very realistic – his view was that the game was over and they needed to exit as best they could. The other brother was adamant that this was a fight.
The AB’s bank had already transferred their file to Asset Management. The father AB1 was a bit shocked that it had all unfolded so quickly. He had farmed in a conservative manner for most of his life – the high risk cropping expansion used more recently was quite new to him.
It was very important to diffuse the tension between the brothers. As the discussion progressed it became clear that they had enough common ground to work together on this problem. Their views of the likely outcome could be different but the initial process was the same.
There was a low level of understanding in the family of what the bank’s transfer to Asset Management meant. Some of the communication had been very blunt and upsetting, but still the bank had not been very clear about its expectations during the process.
The first meeting discussed the path that had brought them to this position and also the processes that had been put in place.
Each family member was in a different position with their own issues.
- Father AB1 and his wife were over 65 years old and unlikely to be able to generate sufficient cash or assets to support themselves in retirement. They were unlikely to get Centrelink support because of loans they had made to the business, which would be deemed as assets event though were not supported by cash or equity in the business.
- Brother AB2 had capacity and willingness to leave early and re-establish his family elsewhere.
- Brother AB3 was resistant to leaving or winding up the business.
From an external perspective, the financial situation was clearly untenable.
- The limits of their bank finance had been reached two years earlier. Unfortunately this was followed by a very poor season.
- Since then they had continued by using alternative finance (seasonal, CBH, supplier).
- Equipment finance was in arrears and one supplier had already indicated an intention to repossess machinery shortly.
- The bank was very clear in requiring an exit plan and action to market the farm.
- No finance available to enable cropping in current year.
Brothers AB2 and AB3 were concerned more for their parent’s financial future than their own.
- The parents’ aim was to maintain ownership of small (~50 ha) block with their house/garden/shed. They also wished to keep a small group of their stud sheep. AB1 was adamant he could work part time and generate enough income to support them.
- Brother AB2 wanted to be released from the situation as soon as possible. He was willing to take on his share of the debt just to move on and re-establish his family.
- Brother AB3 by this stage was refusing to move. He wanted to continue.
- Create a plan to see what might be possible.
- Reestablish relationship with the Bank
- List negotiable and non-negotiable items to discuss with Bank
- Request small amount of continuance funding from the Bank
- Drew up personal for each family member.
- Agreed overall plan for the business
- Contacted all creditors to discuss situation and make arrangements.
- Arranged meeting with Bank Asset Manager (at farm)
Counsellor followed up each meeting with an email to all family members, relecting back to them the main points of the meeting and actions to be finalised.
Phone contact was maintained with each of the ABs to keep a check on their stress levels and any emerging issues.
Contact was maintained with the Bank Asset Manager to ensure progress was made and precipitous action forestalled.
Negotiation with the bank and other creditors enabled the ABs to continue farming in a limited way, while the property was marketed. It was sold to neighbours after three years.
After the sale AB and his wife were enabled to stay on the home block due to a member of the extended family purchasing this land from the bank. Initial discussions with the bank regarding this were very tense – however given the overall plan to exit farming and sell the bulk of the land they allowed this sale to proceed.
As expected, AB and his wife were not able to access Centrelink and were dependant on part time work for funds.
Brother AB2 left the farm within 12 months of the initial meeting. He immediately began work driving trucks. He maintained a good relationship with his parents and re-established his family south of Perth.
Brother AB2 stayed on one farm block after it had been sold to neighbours. He was well regarded locally and began working for another farmer.
The bank did not fully recover outstanding debts but placed a non-pursuance order on the remaining debt. The machinery finance company was owned by the bank so all machinery finance shortfalls were also negotiated as part of the overall debt non-pursuance.