Business succession is an issue that preys on the minds of many small and medium-sized enterprises and family-run businesses. Yet finding a suitable successor can prove challenging.

In the coming years, business succession will be on the agenda of a lot of small and medium-sized companies and family-owned businesses. While searching for a suitable successor to manage the company at the highest level is of utmost importance for the survival of the business, our experience at the commercial law firm GRP Rainer Rechtsanwälte suggests there is a tendency to kick the matter into the long grass. There are several reasons for this: One the one hand, the uncertainty resulting from tax reforms is increasingly playing a role, and on the other hand, emotional reasons can make it difficult for those in charge of companies to entrust others with the fate of their business.

Demographic trends are also making it harder to find a suitable successor. More and more bosses are set to retire. At the same time, there are fewer and fewer young people available to take up the reigns. It is therefore all the more important to make plans for business succession and implement these in good time.

In the case of family-run businesses, the expectation is often for the baton to be passed on to the next generation. In doing so, it is important to consider the implications both from a tax perspective as well as with respect to succession law. One also needs to address the issue of whether, for instance, one’s own children are even interested in continuing the business, or whether they have the necessary qualifications.

Another option is to sell the business. Preparations ought to be made well in advance of the sale. In addition to searching for a potential buyer, priority should also be given to valuating the business in order to determine an appropriate selling price. It is equally important to account for existing employment contracts and inheritance claims. Depending on its corporate form, the business could also potentially be sold to a fellow partner or shareholder.

Business succession is a complex subject in relation to which a number of legal aspects need to be considered. Long-term and forward-looking planning is therefore essential. Lawyers who are experienced in the field of company law can offer advice when searching for a suitable successor and ensure a smooth transition. 

https://www.grprainer.com/en/legal-advice/private-clients/law-of-succession/business-succession.html