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Succession Planning

SuccessionplanningSuccession planning is a complex process involving many business disciplines. As the majority of the Baby Boomer generation retires over the next five to 10 years, succession planning is vital for the long-term survival of private companies. It becomes more complex as many different business, financial and personal issues come into play.

Shares held by an individual, which either on their own or with others acting together, control a private company, will have to be sold or transferred at some stage in the future - either on the death of the owner or as a result of a decision to sell by the owner.

This guide identifies the key issues that need to be considered to prepare a succession plan which balances your needs with those of your family, shareholders and the business.

Why prepare a succession plan?

The preparation of a succession plan forces you are the owner of a major stake in a private company to consider matters in respect of:

  • yourself - your future income needs, how long you want to remain active in your business, who has the management skills to run your business in the future, etc.
  • your family - their future income, their involvement in the business, fairness and equity between your children
  • other shareholders - how will your actions/plans affect the other shareholders; do their requirements need to be considered?
  • your business - how will your departure affect your business; will the key employees feel insecure, will the business lose value with your departure?

Succession planning covers two basic matters - ownership and management. They are strongly interlinked but do need separate consideration. 

A good succession plan for private companies looks at a range of issues such as:

  • Suitable talent
  • Possibilities of floating
  • Current leaders
  • Corporate structure
  • Estate planning
  • Insurance
  • Share transfers.