Family business succession planning is vital
If you want your family business to survive you, it’s important to put a clear succession plan in place as early as possible, that addresses the following issues.
Who will run the business?
Is there a family member suitable to take over, or do you need to hire new people? If different areas of the businesses are run by different family members, tensions can arise when deciding who will take future control.
Try to agree a decision-making structure that avoids future disputes.
When should control pass?
It’s advisable to have a phasing out period during which you can delegate key tasks, share responsibilities and reduce reliance on you. Passing on the business in this way is more likely to succeed and will help identify people who can run the business, as well as any skill gaps.
Who will own the business?
There may be disagreement over whether to sell or keep the business. You may want to involve a management team. Whatever the situation, discuss the options early and document the consensus to avoid conflict.
Discuss the options early and document the consensus to avoid conflict.
When should ownership pass?
Deciding whether to pass shares wholly or partly during your lifetime, or on death is often difficult. It’s important to consider your family’s current needs and any tax implications at the time of the sale, or transfer of the shares.
What legal steps can I take?
An effective succession plan should evolve and be revisited regularly. Discuss your wishes with advisers and family before deciding when to pass on the business and who should own and run it.
Various options are available and a number of key documents should be regularly reviewed. These include wills/trusts, shareholder agreements, share option agreements, employment contracts and even pre-nuptial agreements.
Although it can be daunting, ultimately, succession planning about discussing and deciding what is best for you, your family and your business.