Legal
SUCCESSION PLANNING Robert Knight, Partner in RB’s Wills, Trusts and Probate Team looks at the importance of having a succession plan in place for your business.
M
ore than half of Uk business are family owned and many of those are small businesses. Less than half of these family owned or small businesses have a written and up-to-date succession plan in place. Normally business owners and managers focus on short or medium term goals which tend to relate to financial performance and growth, staffing strategies and business development. Thinking about how the business may transfer both in terms of ownership and management in the future, is not usually incorporated into the strategic business plan. But succession planning should be documented in every business plan and then
32
reviewed regularly, at least once every year. It can give business owners and managers confidence and reassurance. When the time comes to implement the succession plan, or if there is an unexpected event which accelerates the implementation of the succession plan, the business is best placed to succeed and to achieve its specific goals and objectives. Here are some important issues for businesses in the context of succession planning: • Identifying and planning for the next business owner(s) and manager(s) • Getting the tax right • Preparing and reviewing ‘emergency’ legal documents
Identifying and planning For many family businesses this may be obvious. Children may be ideally placed to become the next business owner and perhaps also manager. For other small businesses, the next business owner may be a third party as a result of a sale, or managers as a result of a management buy-out. Where particular individuals are identified to succeed, it is essential to consider their future role in the business, and whether they possess the necessary skills and expertise, the maturity and, perhaps most importantly, the drive and commitment to fulfil that role. A common mistake is to assume that they will fulfil exactly the same role as their predecessor given that every individual has different