Handing over the keys to your business is something that many individuals won't want to think about, especially when they have put a lot of hard work into building and maintaining a company in its current form.
However, having a succession plan in place – especially one that is written down and legally sound – can ensure that your organisation continues to grow strongly.
So what are the ingredients for a successful succession plan? Here are three areas to consider:
Which avenue do you want to pass the business through?
Depending on who you want to pass a company to, there are different ways to make this transfer that will affect the end result.
For example, if the business is going to pass to a family member, it can be contained within a family trust or gifted to the successor. However, if an organisation is going to pass to someone outside the family, it will instead need to be sold to them for an agreed price.
Have you accounted for any accompanying documentation?
Depending on the industry you are working in and the legal documents your business requires to operate, it may be necessary to transfer these to the new owner. Licences, permits and registrations that accompany the running of your business will need to be transferred as part of the succession process.
Failing to account for these changes may mean the new owners are forced to temporarily stop certain activities because of missing documentation, which will be an unnecessary business disruption.
Will there be a change in business structure?
During the succession process, it is worth considering how the legal structure of the business might change. If one person in a partnership chooses to relinquish their share of an organisation in favour of the other partner, for example, there will be a change in the construction of the company.
To navigate all of these changes, make sure you draft your succession plan with the input of a commercial lawyer.