For many small and medium-sized enterprises, corporate succession is generally not a simple matter. Indeed, according to a study by the German state-owned investment and development bank KfW, around 465,000 companies in the above-mentioned category face the prospect of exiting the market by the end of 2025.
The reasons for the upcoming closure of the company's operations are various. According to a KfW study, around 266,000 owners plan to close their business without any search for a solution to the succession issue. The remaining 199,000 owners, although they declare that they are interested in continuing the operation of their companies after their death, still find it difficult to find a suitable successor.
There are many reasons for this state of affairs. First, it is common for family members to be uninterested in taking over the business after the owner decides to retire, while potential buyers have recently turned out to be rather reluctant. At this point, one cannot forget about the difficult economic ecosystem that German companies are currently in. Taking all this into account, it becomes clear why we at Eberhard Advisory law firm emphasize the importance of starting corporate succession planning early.
As a rule, family businesses are mostly interested in internal succession management. In the event that a suitable successor appears, solutions should be implemented that will ensure the smoothest possible transfer of duties to the successor, and this usually determines the financial security of the outgoing owner. It is important that the outgoing owner should also not forget to take into account the claims of heirs who did not become beneficiaries of the company, which generally means ensuring adequate compensation. In addition, the owner should also take into account the provisions in the company's charter that may conflict with the planned inheritance arrangements.
What is more, in the case of donations of business assets, it is also important to take into account the applicable tax regulations, and above all the rules regarding tax exemptions and reliefs.
In the absence of a suitable family heir, another attractive option may be to sell the company to your own management or to outside investors. In such a situation, it is critical that the owner conducts the sale process carefully so as to obtain a fair price as well as to minimize any liability risks that may arise from the sale of the business.
Corporate succession is a comprehensive and complex challenge that can only be successfully met if, in addition to basic economic considerations, parameters such as tax aspects, company regulations and inheritance laws are duly taken into account. It is worth being aware of the fact that in this context there is room for maneuver that can be effectively used by following professional legal advice.
