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Legal,Retirement,Small Business

Business Succession – the Legal Basics

3 Nov , 2015  

Jacqui Brauman
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Jacqui Brauman

Jacqui Brauman at Theobald Lawyers
Jacqui is the principal solicitor and director of Theobald Lawyers Pty Ltd. At the moment, she is everything to everyone! All legal services you may require - small business services, property services, family law, criminal, commercial or neighbourhood disputes.
Jacqui Brauman
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Business succession planning is about planning for the future. It is about making sure that your family and employees won’t be left in the lurch is something happens to you. It is about planning for retirement, and planning for sudden illness, injury or death. It is about making sure your family will not be stressed when they are grieving, as it would be unfair on them to try to fill your shoes. It is also about making sure your business is an asset of some value to your family, instead of the business dying with you.

In 2013, RMIT University completed a report based on a survey of 5,000 randomly selected Australian small businesses. It showed that:

  • the average age of the owners was 58
  • the proportion of owners who were 65 or older was 25%
  • within Australia, Victoria accounted for 35% of the firms (NSW/ACT 42%)
  • 60% indicated that the CEO successor would be a family member and that it would be feasible to implement family succession, and
  • 75% had not yet formulated a succession plan.

An earlier report, completed in 2006, estimated that the wealth of Australian family firms was $4.3 trillion, with 81% of owners advising that they expected to be retiring in the next 10 years – a transfer of wealth of approximately $3.5 trillion.

I believe there are 12 important topics that you need to consider and cover when preparing your succession plan. They don’t have to be done in this order, either. Some are quicker than others, and some can be done alone, whilst others will need the help of your solicitor, accountant or financial planner:

  1. goals and objectives
  2. exit strategy
  3. business valuation
  4. business structure and organisation
  5. tax and legal considerations
  6. estate plan
  7. successor selection
  8. successor training
  9. contingency plan
  10. conflict resolution
  11. timelines, and
  12. communications plans.

The legal documents that you may need reviewed or put into place are:

  • your start up/business structure documents, such as your company constitution, your shareholder agreement, your trust deed, your partnership agreement, your buy-sell agreement, or a combination of these;
  • loan agreements
  • contracts for the purchase of assets, and hire agreements
  • leases
  • insurance policies
  • licence agreements, and
  • your Will and powers of attorney.

But step one is to work out your objectives; what do you want? When do you want to retire? How much do you need to retire? Who do you have in mind to run your business? Do they know of your plans and are they ready?

Then step two is to find some professional (solicitor, accountant and financial planner) that you trust, and who can work together. Put together a bundle of your documents listed above, and make an appointment.

You can make the process as quick or as slow as you want, or as complex or simple as is needed. Just do something – don’t leave no plan and leave your family with a mess.

If you need somewhere to start, you are welcome to contact me.

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