Succession

What it means

Succession is the planned handover of a company’s management and ownership to the next generation, to managers or to a new owner. For family businesses it is one of the hardest moments, because business, tax, legal and family questions all meet in it.

Succession has two layers that need not happen at once. The management layer means handing over the role of director, customer relationships and know-how. The ownership layer means transferring the stake, for example by gift, by a share transfer or by a sale of the business.

Good succession is prepared years ahead. The successor needs time to learn, the company needs time to adjust processes that depend on one person, and the family needs to agree on who will run the company and how the other heirs will be settled.

How it works in practice

With clients we start by reviewing the articles of association: whether the stake is transferable and inheritable, what pre-emption right the other shareholders have and who decides. We often add a shareholders’ agreement governing voting and payouts during the transition.

To set a price or divide fairly between siblings we prepare a business valuation. Within families a gift of the stake is common, and between close relatives it is generally free of income tax; for a sale to a third party we plan the taxation of the proceeds.

For larger groups we consider a holding structure that separates ownership from operations and makes a gradual handover easier. The work also includes a continuity plan in case the founder drops out unexpectedly before the handover.

What to watch out for

Without preparation, a shareholder’s death can paralyse the company for months: the stake passes to the heirs only when probate is over, and until then there may be no one to sign. We therefore recommend having several directors or a procuration and clear rules on inheriting the stake.

The most common cause of failure is not tax but unresolved relationships. If the successor has no real authority or the founder interferes in every decision, staff and banks lose their bearings. The handover timetable should be in writing and known to everyone.