Assets transfer within holding companies has been effective and remains so, with respect to ensuring physical and business assets owned by families are both protected and transferred effectively.
The process of succession is the systematic transfer of inheritance to the next generation and this is not easy especially when such inheritance is money or business holdings.
In this perspective, the establishment of a family holding company seems to be an effective tool as it assists in the management of shares and prevents disputes among the successors.
What is a Family Holding?
A family preserving organisation is an entity fashioned for the motive of consolidating an entire own family’s property interior a unmarried criminal framework. In other phrases, it’s far an entity whose most important goal is the consolidation of individual family individuals’ belongings.
Such an entity may encompass real estate, equity in corporations, cash and other less liquid financial instruments.
The primary role of these businesses is to make it easier to manage one’s assets, decision making, inheritance, as well as preventing the assets from being squandered.
To establish these companies, the asset owners transfer the properties to the holding company and in return, they receive shares or stocks in the new company.
In this way, all the holdings are kept under the control of the holding company; the assets still belong to the heirs or successors but in the form of company shares, which makes the asset succession easier.
Benefits of Asset Succession in Holdings
The creation of a holding company offers a series of benefits for the wealth succession process .
Among the main ones, the following stand out:
1. Organized Succession Planning
Allocation and transfer of an estate to heirs who can pass it down to future generations is among the most challenging stages in a succession process.
Through dealing with the succession of assets in holding companies, there is a more elaborated succession planning which has the rules determined in advance by the founders of the holding company.
In this way, there is a decline in the probability of disagreements and a guarantee that the property complies with the founder’s requirements.
2. Protection of Assets
The holding company provides an additional layer of asset protection .
By concentrating assets in a specific legal structure, the holding company makes it more difficult for any personal problems of the heirs, such as debts or marital separations, to affect the family assets.
Asset succession in holding companies, therefore, ensures that assets remain protected throughout generations.
3. Tax Reduction
Another significant benefit of using a family holding company in the succession process is the possibility of reducing the tax burden.
The transfer of assets through donations or inheritances may be subject to high taxes.
By creating a holding company, it is possible to structure the asset succession in a way that minimizes the tax impact, using, for example, donations of shares with restrictive clauses.
4. Business Continuity
For families that own companies, creating a holding company also ensures business continuity.
Often, the lack of adequate planning can compromise the survival of family businesses after the death of the founder.
By transferring management to the holding company, heirs can become shareholders and have a share in the profits, without necessarily needing to participate in operational management.
Structuring Asset Succession in Holdings
To implement asset succession through a holding company, it is essential to plan the structuring of this entity in detail.
Below are some important steps to ensure the process is efficient and meets the family’s needs:
1. Identification of Goods
The very first thing to do when establishing a holding company is to compile a list of all the assets that are to be incorporated into the company. Such assets may involve real estates, businesses, investments and any other valuables.
A proper evaluation of each one of the assets should be done in order to determine a proper course of action on the transfer of resources.
2. Establishing the Rules of Succession
After the establishment of the holding company, the next consideration is how to govern the succession of authority and ownership of the family business. This relates to the question of how the shares or stocks of a company will be allocated to the surviving members of the family and the rules regarding enjoyment of these shares by the members.
There are also families that decide to have them, inter alia, the lack of ability to sell shares to outsiders so that everyone stays on the family side.
3. Governance Structure
Another fundamental aspect in creating a holding company is defining the governance structure.
This involves choosing the holding company’s managers, who may be family members or external professionals hired to ensure the efficient administration of the assets.
It is important that this governance is clear and transparent, to avoid conflicts between heirs.
4. Legal and Tax Regularization
Finally, the creation of a family holding company requires legal and tax regularization.
This includes drafting a detailed articles of association, which reflect all the rules of patrimonial succession and administration of the holding company, in addition to obtaining all the licenses and registrations necessary for the operation of the company.
Risks and Precautions in the Succession Process
Despite the numerous benefits, wealth succession through holdings also presents some risks that must be taken into consideration.
It is important that the rules laid down are not challenged by any of the heirs, which is both one of the hardest obstacles and one of the most crucial for the operations of the holding company, as a lack of consensus will ultimately cause disputes, which will defeat the purpose of the holding company.
In addition, the importance of competent legal and fiduciary advice can never be stressed enough; it is crucial in the steps of both forming and conducting the holding company’s activities legally.
Moreover, improper structure can result in tax issues and a threat to the assets in place, which can be detrimental in the long run.
Why is it essential to have a succession plan?
Inadequate structuring will at best result in loss of assets. The reason many lose their inheritance is that they leave it to the last minute, and doing so creates immense pressure to find a succession plan and let us be realistic, poor consequences are expected.
That being said, key aspects when planning should include discussions around adjusting to the family’s requirements long before the precursor has health issues or is older.
This includes everything from choosing heirs to defining the holding company’s governance structure.
Conclusion
Asset succession in holding companies is an efficient strategy to ensure the protection and continuity of family assets.
By centralizing the administration of assets in its own legal structure, the holding company facilitates the succession process, reduces the tax burden and protects assets against potential personal problems of the heirs.
Furthermore, the family holding company offers a series of benefits to family businesses, ensuring business continuity and avoiding conflicts between successors.
However, for the succession to be successful, it is essential to have detailed planning and specialized advice.
