Family Company
Arguably one of the most efficient ways for continual management of family wealth across generations!
This is ideal suitable for a multi – family situation. A group that consists of many families; you have the head of family & spouse, 2/4 children, some married and some not married, some grand-children that are married, unmarried as well. Such a group that has many individuals, companies, complex structure with myriad of assets, cross holdings and where new individuals need to be regularly inducted in the family by virtue of birth or marriage.
What is a family company?
This is just like any other private limited company registered under the companies act. There are 2 vital differences. It is created as an entity that will hold ownership of family’s total wealth and such type of financial vehicle is the most efficient way of succession planning. Surely you have heard about companies with the word “holding” as part of the company name. An example could be “XYZ Holding Private Limited.”
Issues with Multi-family groups
► There may be many companies in different forms; some partnerships, private limited, public limited trust etc.
► Everything is not easily divisible and perhaps many assets are needed such as main office etc and cannot be sold just to provide for inheritance.
► No matter how hard you try perfectly equal division is hard to make especially when you have so many stakeholders.
► There are many assets in multiple name combinations, assets are in different categories viz., real estate, bullion, stocks, bonds etc.
Thus allotting shares in the family company can ease out most the issues & associated stress. A significant advantage of this methodology is that perfect share/s of major members of the family can be kept intact. However neither the business nor the members will be in the same state. It is definitely a good idea but it’s easier said than done. Some immediate issues that need answers are;
► Who will control such a controlling company?
► Who will be the board of directors / partners of the company?
► What will be the rules for allotment / transfer of shares?
► What expenses are allowable from such a company?
► There might be inter-company transactions which may need to be sorted out first.
► And many more… specific to the family / group in question
Like always there is no standard solution but this by far is an excellent method for planning inheritance and leaving a legacy behind.
Talk to us to know more about how we can help you.