In recent decades, agribusiness has been gaining more and more prominence in the world economy and in business activity, requiring its administrators to manage resources and production processes efficiently. Professionalization encompasses the application of strategic planning practices, training and qualification of people, financial control, logistics and marketing, as well as increasingly strategic investments in technology.
Every effort is being made to increase the competitiveness and profitability of farms. It’s no wonder that the Gross Value of Agricultural Production (VBP) reached R$1.189 trillion in 2022 and R$1.25 trillion in 2023, according to the Ministry of Agriculture, Livestock and Supply (MAPA) and the Confederation of Agriculture and Livestock of Brazil, the highest figures in the historical series, which began 34 years ago.
The transformation of agro-industrial activities, together with the dedication of farm owners, has generated great fortunes in Brazil. However, the pioneers of the country’s agricultural frontier must soon pass on the baton to the next generations.
If the agricultural enterprise is increasingly behaving like a family business, patriarchs and matriarchs need to take the example of large industrial companies into consideration. It is not uncommon for regional, national or even international economic powers to decline due to succession problems. Assets are damaged by inheritance-related conflicts, poor business management and the incurring of debts.
In addition, it is important to note that not all heirs may be prepared to continue the business. There is also the case where a company has partners from two or more families who may feel threatened by the future. As a result, without the right corporate measures in place, business continuity can be a challenge.
To avoid this situation, we recommend succession planning in the agro-industrial enterprise, as well as defining clear corporate rules to govern the relationship between the partners. Why not prepare the Family Pact, which is nothing more than a contractual instrument drawn up in advance and with transparent succession rules?
This planning, whose main objective is to segregate family assets from business assets and consequently protect and perpetuate the family legacy, has never been more necessary, given the series of changes in Brazilian tax legislation that directly affect estate planning, which have already taken place and may be about to become a reality.
As an example, we can mention the Tax Reform (Constitutional Amendment 132/23), which changed the system for charging the Tax on Causa Mortis Transmissions and Donations (“ITCMD”) from fixed rates to a progressive model. There is also Bill 7/2024, currently before the São Paulo State Legislative Assembly, which aims to adapt state legislation to the changes introduced by the Tax Reform and establishes progressive ITCMD rates, which would reach up to 8%, according to the table below.
The Constitution and Justice Committee has already published a favorable opinion on the bill. It is important to note that, if approved, the effects of the new rule must respect the principles of anteriority, so that the new rules would only be valid from 2025.
Political and economic instability also has a direct influence on the need for family, succession and estate planning, because when it is well structured, it can avoid major impacts and financial losses for the company, even if there are radical changes in legislation and taxation models.
For investors, this type of operation also generates greater confidence in the purchase of debt securities to finance business activities.
Thus, family, succession and estate planning is undoubtedly the best solution to allow the business to continue for generations to come, generating tax savings and shielding assets, as well as avoiding family corporate disputes in the future.
Succession planning begins with a study taking into account the characteristics of the estate, peculiarities and family structure, as well as business aspects. From there, lawyers can propose a series of solutions, such as creating family or real estate holding companies, drafting shareholder pacts and agreements, setting up offshores, preparing wills, trusts and donations with usufruct reservations, among others.
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