Settle business succession early on
The issue of business succession preys on the minds of the heads of many family-run businesses. Plans for succession ought to be made at an early stage. It can also be helpful to prepare a will.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Many small and medium-sized companies as well as family businesses are going to have to make arrangements for business succession in the coming years. It is particularly in relation to family-owned businesses that the issue of how the transition at the management level of the company ought best to be managed frequently arises. In many cases, there is a desire for the successor to come from within the family.
If a family business is to be continued by the next generation, the transition should be arranged in a way that ensures the process is as smooth and effective as possible. For this reason, it often makes sense to organise business succession while the senior director is still at the helm but has already ceded responsibilities to his successors. It may be a good idea to transfer the business or parts of it by way of a gift in order to facilitate the integration of children or other relatives into the firm. If the head of the company does not wish to hand over the management of his firm until after his death, it is essential to prepare a will to guarantee the continuation of the business.
In the absence of a will, the rules of intestate succession kick in. This can result in disputes among the heirs as well as potentially put the company”s existence at risk. Moreover, there are no rules of intestate succession to make sure that corporate management falls into the right hands. That is why it is absolutely crucial to make arrangements for business succession in a will or contract of inheritance, or even by establishing a foundation where appropriate, taking into account the relevant statutory regulations. It is equally important to exercise caution in cases involving so-called “Berliner Testaments” (Berlin wills), because it is no longer possible to unilaterally amend the mutually agreed instructions after the death of one of the spouses. In addition to the will, one must also take account of the firm”s corporate form, as this can have an impact on the future ownership structure. Company shares are not capable of being passed on in every case.
Preparing for business succession is a complex process that necessitates comprehensive and interdisciplinary legal advice to ensure that the transition occurs smoothly and effectively.
GRP Rainer LLP is an international law firm with lawyers and tax advisers specializing in business law, commercial law and company law and tax law. The attorneys counsel international commercial and industrial companies and corporations, as well as associations, mid-sized businesses, institutional investors and private individuals worldwide from offices in Cologne, Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart, Germany and London UK.