‘My accountant knows everything’
‘My accountant knows everything’ is yet another one of those succession phrases that should send shivers up your spine.
Not because accountants are bad, but because it may mean that the current leaders of the family business don’t fully understand the legal structures and tax strategies in play. And those structures and strategies may have a profound effect on any succession plans being developed. Any business that has been around for a while, and has some level of success or diversified into various activities, is likely to have multiple entities in its structure. These entities represent strategies to separate and compartmentalise varying commercial risks and minimise the current tax burden. Also, if the business has more than one family as shareholders or has passed across generational lines already, then these structures have the potential to become very messy.
The structures can become further complicated through interconnections, securitisation of debt, profit shifting, inter-company debt, cross-shareholding, minority shareholding by third parties, and so the list can go on.
Also, often the supporting documentation is not all in the one place or up to date, as various advisors have come and gone over the years.
This is an area that must be addressed and is also a golden opportunity for the next generation, to step up, get their hands dirty and greatly support the transition process.
With the family’s consent (particularly that of its current leaders), I would recommend that one to two members of the next generation go and see the business’s accountant and begin to build the wealth map of your family’s business entities. It’s going to be boring and time-consuming but for those next generation members bringing themselves up to speed on what the various legal entities do, own, owe and are linked to, is an invaluable succession learning exercise. This information can be shared at the family meetings and will support meaningful discussions within the family. But a word of warning, there may be some sensitive matters that arise as the wealth map is developed, such as business failures, private ventures, debt levels etc. Be factual in the gathering and recording of this information and keep the current leadership team fully informed as you progress. If this task is done well it can significantly support a successful transition process, but if handled badly it could stall the process.
As a member of the incoming generation, good leadership requires that you be across what may seem mundane details. But be assured the transition of the necessary legal structures will make a world of difference when it’s your turn to lead the family business.
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An Invaluable Resource — ‘Transition — Orienteering The Lands of Succession’
