Jayme Petra de Mello Neto
Lawyer at Marcos Martins Advogados
The traditional concept of family – made up of a man and a woman united by marriage and with legitimate children as descendants – is no longer the only option. For some years now, the courts have been adapting to the transformations in society, seeking to keep up with the changes and guarantee the rights of all those who are involved by legal or emotional ties. The issue is that companies are not always prepared to deal with these new contexts.
According to IBGE data, more than 90% of Brazilian companies are family-owned. However, more than 70% do not pass on to the second generation. Only 5% of them make it to the third generation of their founders. The complexity becomes even greater in families with unconventional structures. To change this reality and increase the perpetuity of companies, succession planning is fundamental, avoiding fights and helping to preserve assets.
Some problems are common when it comes to succession planning. One of them is the lack of interest on the part of successors in taking over the business or even the lack of preparation and knowledge to manage the company, its demands and needs. In both cases, the consequences can be devastating if there is an insistence on appointing a family member to this position without the necessary skills.
In such cases, it is possible for a nephew, cousin or even a child raised by the family who has not been legally adopted to take on this role, provided they are ready for the task. Other family members can be part of the board of directors, having full knowledge of the company’s situation and the possibility of directing business guidelines.
However, if it is not possible to identify any direct heir or family member with the necessary skills, it is best to look for a professional on the market. Hiring a CEO may be the best alternative to ensure the preservation of family assets and thus the perpetuity of the business, as well as the smooth running of the company.
Another option in the absence of heirs who are interested and prepared to take over the management of the business is a total or partial sale or a merger with another company. In all these cases, it is necessary to map out the operational and legal situation of the business, assessing risks and opportunities, assets and liabilities in order to arrive at a fair valuation for everyone involved.
Whatever the family model, business succession should always be carefully thought out and structured to minimize conflicts and future problems. It is smart to organize this succession in advance, choosing the person who has the best chance and preparing them over time – having an effective stake in the company’s capital so that, when the time comes, all their efforts are recognized and not shared with others who were not part of this journey.
Once the decision has been made about the future of the company, it is important to take stock of all the assets, both those of the entrepreneur and those of the company. You need to map out financial investments, movable and immovable property, shareholdings and rights. You also need to understand the family situation, such as the marriage regime, the age and involvement of the heirs in the family business, among other particularities. Once this has been mapped out, the best succession structure can be chosen with greater clarity and peace of mind.
In a traditional family, where the law has already given certainty to legal relations, it is a fact that the procedure for resolving conflicts is easier, while in those where the family structure has not yet been certified, this process is slower. For this reason, it is essential that the family structure is stabilized before the succession takes place, so that only then can the rules for this transition be defined.
In order to ensure that the wishes of the company’s founder are carried out legally, it is essential to have the unrestricted support of a specialist lawyer who has a background and training in corporate and family law. This professional should have a thorough understanding of the entrepreneur’s wishes, what the family relationship is like, whether the children are aware of the process that will be implemented and everything that involves the company’s assets – as well as the actual state of the company, including its debts, promises and conflict resolution mechanisms. With a comprehensive and complete mapping, succession planning can be carried out successfully, regardless of the family structure.
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