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The Family Business should not confuse equity with equality in succession to ensure the future of the company

| News | Tax / Corporate Law and Commercial Contracts

Family Business Consulting Experts Underline Need to Plan for Future Management to Ensure Continuity

The family business in Spain currently creates 67% of private employment and is responsible for 57.1% of the private sector GDP. The process by which the succession of the family business is opened is a critical moment for the survival and success of the project. To ensure their future, family business managers should not confuse equity with equality and distribute wealth and management in the most viable way for the company.

This became evident during the talk organized by Andersen Tax & Legal, in which experts in advising family businesses such as Jesús Cano, Exclusive Mediator of the insurance company Swiss Life Global Solutions, Mario Álvarez, Managing Partner of Piedmont, Business and Management advising office, Javier Vinuesa, Partner of Andersen Tax & Legal and coordinator of the Family Business group of the firm, and Santiago Fuertes, Senior Associate of the firm, shared with those attending the event, among them representatives of companies, family offices, bankers, financial intermediaries, among others, the key aspects that can facilitate a correct succession of the family business, as well as the most common errors that need to be avoided.

Javier Vinuesa explained during his speech the different tax characteristics of the autonomous communities in terms of inheritance taxes, donations and on assets that affect the continuity of this type of companies being Asturias, Castilla y León, Extremadura and the Balearic Islands the autonomous communities with more tax burden on inheritance taxes and donations and Andalusia, Murcia, Castilla-La Mancha, Madrid, Basque Country, Navarra, La Rioja and Cantabria the least. While the communities with the highest tax burden with increased rate and a lower exempt minimum in taxes on wealth Vinuesa explained, are Galicia, Asturias, Cantabria, Catalonia, Valencia, Murcia, Andalusia, Extremadura and the Balearic Islands. On the contrary, Madrid and La Rioja enjoy a low tax burden with bonuses of 100% and 75% respectively. 

Vinuesa pointed out that out of all the family businesses in Spain, only 56% of the companies go on to the second generation and from these only 15% to the third one, and he made special mention of different tools for succession such as Unit links, a life insurance with which the policy holder designates the assets in which he wants to invest while the insurance company holds the ownership of these assets and assigns them to the policy.

For his part, Jesús Cano oversaw explaining to the attendees the challenges of succession in the company and how insurance can be a vehicle for resolving possible conflicts within a family business. He explained that currently the challenges that are hindering succession in the family business are global, the fact that families are no longer local or follow a traditional model. A great challenge for the coming years, in which the world wealth to be transferred amounts to 15 trillion dollars until 2030, he said.

During his speech, Mario Álvarez explained how conflicts can be avoided, although he acknowledges that sometimes "it is inevitable". We should not start from the ambition of specific members of the family," said Álvarez, "but from what the company needs at each moment. The speakers stressed that family protocol, corporate governance and personal planning tools are essential legal instruments to avoid possible conflicts.

Santiago Fuertes discussed the different measures to be adopted to avoid conflicts and referred to the importance of not confusing justice or equity with equality, as in many cases trying to make an equal distribution may imply problems in the future or make the company unviable. Thus, he insisted on the need to choose well the structure of the company.

On many occasions," he said, "the holding structure may not be the most successful if the same percentage of power is given to all partners and pointed to the need to provide in the statutes a possible agreed and easy way out of the partners without harming the holding. At this point, he gave examples of family businesses in which each partner has a different role and in such a way that some assume the management and the rest cannot intervene in it.

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