![]() The majorities required for important decisions, such as the decision to sell or liquidate the business, should also be determined. Prior to transferring shares, it is important to establish governance policies and execute shareholder agreements governing future ownership.Īny restrictions on ownership as well as a workable buy-sell agreement among shareholders should be agreed upon as a prerequisite to transitioning ownership. Many strategies are available to accommodate transition needs and objectives.įinancial independence for the senior generation, the capabilities of the succeeding generation, and the financial strength of the business should all be considered in identifying appropriate strategies. It might also be able to provide ongoing medical benefits. The company could provide income to the senior generation via a retirement or deferred compensation plan established prior to retirement. When relying on the business to fund a transition strategy, owners should take care to ensure the continuing financial health of the company. The company then becomes the ultimate source of funds to complete a successful transition. In many cases, however, there is insufficient liquidity for the next generation to purchase shares. If the senior generation doesn’t have sufficient financial assets to meet their retirement needs, a sale or partial sale to the next generation may be in order. Will independent directors or advisers be engaged in the governance process? How will ownership and management be held accountable to shareholders in the future?.What should the distribution of ownership among siblings be for voting (preference) and non-voting shares?.If voting (preference) and non-voting shares are in place, what are the transitioning objectives for each class of shares?.Is an appropriate capital structure in place to accommodate an efficient transfer?.If the company is being transferred to the next generation, are appropriate policies and agreements in place to support the transition?.If the next generation is not willing, will the proceeds from a sale to a third-party purchaser be adequate to fund the lifetime needs of the family?.If not capable now, what resources and timing will be required for the next generation to become capable?.Is the next generation willing and able to assume ownership and/ or management of the business?.Will such income provisions limit future financial opportunities for the company?.To what extent can the senior generation access ongoing retirement income from the company?.If sufficient assets are not available outside the business, to what extent must the senior generation rely on future income from the business?.To what extent does the senior generation have such assets currently invested outside the business?.What level of investment will it take to provide the necessary income (after tax) to accommodate that lifestyle?. ![]() What income will the senior generation need to sustain a comfortable lifestyle?. ![]() What is the senior generation’s personal vision for their lifetime?.When drawing up a succession plan, ask the following key questions: ![]() All owners should be involved in the planning process. The financial implications of a transition affects both the older and younger generations.Īll too often, the generation at the receiving end of wealth transfer fail to protect their wealth through appropriate financial and estate planning. Once financial objectives are identified, tax and legal counsel can be consulted to establish the most effective strategies and action plans to accomplish these objectives. Personal decisions, including establishing financial security for the senior generation, are often the most difficult to make. Transition planning involves both the business and the family, and financial and personal decisions therefore have to be made. If the next generation is not willing or able to assume future ownership of the business, the senior owner must decide whether to sell to a third party or remain active in the company. The transition process frequently involves programmes to educate and prepare the next generation for their future responsibilities this will also have to be factored in. The transition process should begin with the owner establishing a clear vision of his or her future after the business is transitioned and discussing this with the next generation.Įveryone should then decide whether the next generation is willing to take on the responsibility of ownership and/or management of the company, and if they are capable of doing so.
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