Family business owners are a special kind of person; they have used a great deal of energy to build something of their own or to expand a business they inherited from their parents. Their lives often revolve around the company, and they are tenacious individuals—who, however, consider themselves more invulnerable than others.
This trait can have disastrous consequences. If the owner suddenly dies or becomes seriously ill—to the point where they can no longer communicate, for example—the company can quickly become unable to function.
“From our experience, I know that in about a quarter of companies, the other managing directors, authorized signatories, or the spouse do not have the necessary powers of attorney,” says Sebastian Göring of Euroconsil.
The Importance of an Emergency Kit
“An ‘emergency kit’ is the most important thing to ensure that the company stays on a steady course.” It should contain a list of all signing and representation authorizations as well as powers of attorney (such as for the company’s main bank) and, of course, a corresponding will specifying how and with whom the company should continue.
Far-sighted family business owners gradually groom successors. But by no means do all patriarchs follow this rule. If the owner has not yet chosen a successor, it is helpful to have “a strong second tier within the company,” says Sebastian von Thunen, an attorney at the law firm Hennerkes, Kirchdörfer & Lorz, which specializes in family businesses.
They are required, for example, to file wills with the probate court. In addition, they must decide whether to accept the inheritance at all. They have six weeks to do so. “If the estate is insolvent or overindebted—for example, because the owner engaged in speculative transactions without the heirs’ knowledge—the heir’s liability can be limited to the estate,” says von Thunen. To do so, an application must be filed to open estate insolvency proceedings.
A Distinctive Feature of Communities of Heirs
“In our experience, these groups are very slow in making decisions due to the principle of unanimity,” says expert Göring. “There is a risk that the company will become unable to act if the heirs pursue differing interests.” In this case as well, wise patriarchs plan ahead—by designating who should have the final say within the community of heirs.
If the owner had considered selling his company before his death, an appropriate M&A firm should be engaged to initiate the sale of the company with the support of the company’s tax advisor.
