Taking the time to carefully plan and execute the transfer of your business from one generation to another or to a new owner is crucial and ensures the continuity and function of the business. It's true that starting the planning process and navigating all of the options can be daunting, but that's where your lawyer and accountant can help.
When we take a look at all of the family and private businesses in Australia, only a third have succession plans. This means a huge amount of business value is being lost.
What are the Succession Options for SMEs?
Generally, your options for small and medium enterprise successions are:
- A management buyout
- A management buy in, usually in the form of an employee share option plan
- A standard market sale, usually via a broker of some sort
- Some kind of public offering, usually an initial public offering or private equity buyout
- And, finally, a family or generational transition
To maximise the value of your business, it’s important to be mindful of all options available to you and your potential successors.
What Should I Consider When Planning a Business Succession?
From a legal standpoint, some things to consider are:
- The present legal structure of the business, and whether it's right for effective succession, including taxation implications and compliance with existing legislation
- The key assets, liabilities, and contracts of the business
- How a transition may affect business staff and customer expectations
- Premises ownership for all operating locations
How can a Lawyer help with my Business Succession?
Once you're in the throes of succession, some of the ways we can help include:
- Establishing shareholder or partnership agreements
- Updating or establishing new company constitutions
- Updating employment contracts
- Affecting employee share option plans, in conjunction with your accountant
- Reviewing your insurance coverage for adequacy; and
- Estate planning beyond your business, including wills and personal estate management.
Business succession can be complex and involves a variety of legal, financial, and interpersonal considerations. We have barely scratched the surface in this article, so we invite you to get in touch to discuss any or all your business succession and estate planning legal needs.
