Succession and next-gen

At the end of the day, you will want to pass on your family business to the next generation. Did you know that only one in three family businesses survives the transfer of the company by the founders to their children?

The likelihood of continuation increases when you carefully discuss the succession in good time with all stakeholders: your family members, but also your staff, customers, suppliers and your bank. This demands careful planning and implementation, and that is where we can help you.

Family charter

No succession or values

While family businesses come in all shapes and sizes, they all have to deal with three systems: the company itself, the shareholders and the family. When we refer to succession in a family business, we are not only talking about the succession in the leadership of the company or the transfer of shares to the next generation. There is also the question of succession within the family. It is seldom possible to plan this succession and the death of a patriarch often has a huge impact on the dynamics within the family involved. Who will assume this role and will this change be accepted by the family?

Renate de Lange – tax partner and involved in many family businesses in her capacity as a PwC tax partner

Only one in three family businesses survives the transfer from the company founders to their children. In practice, we are seeing that governance at the company level is often arranged in many family-run businesses and professionalisation has been increasing in the past few years. More and more, companies are voluntarily electing to establish a supervisory board which, on the one hand, acts as a sounding board for the family and management while, on the other, also performs oversight on behalf of all stakeholders involved.

Also at the shareholder level, a family will often have made agreements regarding the dividend policy and the conditions under which a shareholder may join or leave the enterprise. But the importance of good governance at the family level is often underestimated in practice.

How do you ensure that you keep the family members involved with the enterprise and how do you guide them on the path towards responsible share ownership? How do you engage in a dialogue about the assumptions and expectations that exist but which no one speaks about?

It is important that people put their heads together on questions such as: What are our core values? What keeps us together as (shareholders of) a family business? How can we inspire love for the family business in our children? What role do we see for family members by marriage? These are all questions that the family as a whole must find satisfactory answers to.

A family charter can play an important role here. A family charter is more than about dividend policy and share ownership. At its heart, a family charter is about the family’s core values, what the family considers important and how the family members deal with one another and the company.

In this respect, the document is not a goal in and of itself. But if all concerned are to agree on a dignified document, the family must discuss the expectations and assumptions that have up until now often been left unspoken. It is an extremely valuable and educational process for all stakeholders. It is a process in which PwC can assist you.