emotionally prepared to take over. Be mindful of family dynamics and address underlying issues before they become problematic.
“Ensure the arrangement is fair, especially if you have multiple children. Balancing ownership and ensuring responsibilities reflect their true abilities will avoid future disputes.
“Establish a clear mechanism for resolving disputes and consider appointing a non- executive director to the board to provide guidance and to mediate any disagreements.”
And he adds: “Get a professional valuation to determine the business’ worth and ensure that all aspect of taxation including Capital Gains and Inheritance Tax are considered. Ensure your financial future and that of your children are secure post-transition.”
Lucy Panchal, partner at Champion Accountants, adds: “From defining roles to managing tax liabilities, preparation is the key to success. In family businesses, open communication is crucial.
“If a family member feels forced into an unwanted position, it can cause resentment and impact morale and performance throughout the company.
“Engage all parties early and involve them in decisions to avoid these issues and ensure necessary training and education are provided.
“Do family members stepping into key roles need leadership training or other upskilling?
Expert View PLANNING FOR
SUCCESSION SUCCESS By Debbie King,
partner and head of corporate at Farleys
Our advice to business owners is to always plan as early as possible for your future retirement.
If you’re the mainstay of the business, you need to think as early as possible about who will replace you and the roles you carry out, including whether that could be one person or more than one, to perform functions that currently fall within your remit.
As your business grows, you should try to put a second-tier of management and identify those within that who have a flair for driving the business forward rather than simply doing their day job.
Once identified, cement those people into your business and its culture. This can be done by giving them share options, appointing them as directors or giving them additional responsibilities, with the aim being that by the time you want to retire, the business can be run without you being there.
We encourage business owners to talk to their management team as early as possible about whether they have any
interest in taking the business over, to see if they are actually interested, as some people simply don’t want that level of responsibility or financial pressure. That may mean that the owner will have to look for a sale to a third party to secure their exit.
If the management team are interested, you then need to think about how any transaction would be structured.
Consider what your immediate cash needs would be on retirement. What savings would the business make by you not being there and would it have any additional costs? Would you be happy to take the remaining funds out of the company over a period of time, with interest and security?
The ideal scenario is that your management team can fund your exit over time from the ongoing profits of the business, rather than having to introduce funds themselves, which they may not have, or obtain bank funding, which is hard to get for exit payments and can be expensive for the business.
Also, keep everyone in the loop about structural changes by informing the wider business about leadership shifts, and what will be expected with new management.”
She adds: “Behind the scenes, early tax planning is vital. Being smart about tax planning ensures you don’t pay more than necessary, helping protect your family’s life work and legacy.”
And what if things aren’t working out post- succession? Ryan Bilsborough at PM+M says there are steps that can be taken to get things back on track.
He says: “Assess the situation. Conduct a thorough assessment to identify where you are, what the problem is and what you can do to solve it.
“Be honest and encourage open but respectful dialogue to address concerns as that will help find solutions.
“Consider bringing in external or temporary non-family management as they may be able to provide stability and expertise. Further training and mentoring may help the successor improve their skills over the long-term.
“Realigning roles and responsibilities that better match the strengths and weaknesses of the successor often works.
“And don’t be scared to review the succession plan and adjust as necessary. This isn’t personal, it’s about the company thriving.”
Running a business isn’t always
straightforward...
...but we believe the law should be
Whatever challenges your business throws at you, Farleys are here to help with down to earth legal advice tailored for you.
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IN VIEW
LEGAL VIEW
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