1. When is the ideal time to plan for business succession?
In principle, there is no such thing as “too early.” For one thing, no one is immune to sudden death, so arrangements should be made early on in case this occurs—usually through a will. Second, it’s important to consider that careful business succession—whether within the family or through a sale to a third party—requires a significant amount of time in advance to clarify interests within the family, search for a successor if necessary, and prepare and implement the succession plan.
If the business is not operated alone—but rather, for example, by multiple shareholders—succession options and transfer possibilities should generally be considered as early as the time of joining the company and drafting the articles of association, in order to avoid a potential future blockage of the desired succession plan by a co-shareholder.
2. Business succession in family-owned companies—what are the biggest challenges here?
First and foremost, it is important to determine which family members are actually suitable for succession in terms of character and educational background—and who are also interested in taking over the business. Then, of course, it is a matter of addressing the various emotions involved, particularly those of family members who may not have been considered. Conflicting interests—not least financial ones—should, whenever possible, be addressed and resolved by mutual agreement.
Whether implementing business succession through a full or partial transfer of the business to family members or in the case of inheritance, the question always arises of how to ensure a fair distribution of assets among family members—particularly the spouse and children— without jeopardizing the company’s continued existence or provoking subsequent inheritance disputes.
Once these obstacles have been overcome and successors are in place, the actual transfer of business leadership during the entrepreneur’s lifetime often presents challenges for both the entrepreneur and the successor in their day-to-day collaboration and the direction of the business. The entrepreneur must let go of his life’s work to some extent and place his trust in the successor. The successor must find their own approach to managing the company, though they are often well advised to accept the entrepreneur’s guidance and advice.
3. How does BRL support entrepreneurs in the succession process?
As a multidisciplinary firm providing legal, tax, and auditing services, BRL offers clients comprehensive advice on preparing for and executing business succession, whether it involves structuring succession within the family or as part of an M&A process involving a sale to third parties. A particular focus is placed on the preparation and implementation of succession under corporate law.
In the case of intra-family succession, the implications under inheritance law, for example, must be given special consideration. The implementation always requires tax review and planning, not least to avoid tax burdens wherever possible. Our advisory services often begin as early as the company’s founding or during its ongoing operations, so that key strategic decisions and structural arrangements for future succession can be prepared and implemented at an early stage.
4. What is the significance of “employee participation” as an element of business continuity?
Especially when the entrepreneur steps down, retaining senior executives and other key employees is often essential to ensuring the successful continuation of the business. One way to encourage employees to stay and motivate them for the future is to give them a stake in the company’s success. There are a wide variety of options available for this, such as performance-based bonus components in compensation that are linked to the company’s revenue or profit, or to individual performance achievements.
For particularly important employees, especially at the management level, a corporate ownership stake in the company may even be an option. Depending on the specific circumstances and the wishes of those involved, various models can be developed to create suitable employee participation programs without significantly compromising the entrepreneur’s business or financial independence.
5. And now, on a personal note: Which succession process that you’ve guided has left a particularly lasting impression on you?
There are quite a few. Overall, the issues and specific circumstances are as varied as they are individual. As a result, there’s really no such thing as a “standard” succession process. Sometimes things get stuck right at the beginning, when the business owner has made plans for their children but has never actually asked them what they themselves really want. That’s when you see some surprised faces. Sometimes it can be very effective to work out the wishes and interests of family members through a professionally facilitated discussion or mediation process.
Entirely different challenges arise when the legal and tax implementation is contingent on the consent of co-shareholders, but the initially good working relationship among shareholders has deteriorated over the years or even become highly contentious. Here, too, a great deal of tact is required in the advisory process to avoid unnecessary escalation, often triggered by minor issues. Such a dispute is generally detrimental to all parties involved. It is all the more rewarding, therefore, when, in the end, all parties jointly find a solution that is satisfactory to them, allowing the company—with its history and its employees—to be passed on to the next generation.
