A family holding company is a company set up between people from the same family in order to concentrate assets in one legal entity. This type of structure is usually used to concentrate the family’s assets (such as real estate, shareholdings, movable property, financial investments, etc.) in order to facilitate management, reduce tax burdens, avoid excessive expenses in the event of an inventory and also avoid family disputes.
One example of the successful use of family holding companies that was publicized a few weeks ago was the family holding company set up by Silvio Santos’ family. When the presenter passed away, many people even considered a future family conflict over the distribution of the inheritance. However, the communicator anticipated this and created a family holding company while he was still alive, thus making it clear how the family’s properties would be managed, distributed and controlled.
By centralizing the administration of his assets and preparing robust succession planning, Silvio Santos demonstrated how family holding companies can serve as a powerful tool to ensure the continuity and growth of family assets, minimizing disputes and promoting a smooth transition for heirs.
Through the use of a family holding company, it is possible to establish succession rules related to the assets allocated to the legal entity by means of a partners’ agreement and in the articles of association, which are more feasible and easier to interpret when compared to the rules applicable to individuals, in addition to dispensing with the need to draw up a judicial inventory for the assets included in the holding company, resulting in a considerable reduction in the time associated with the transfer of assets and avoiding extra costs with the Judiciary.
Another point that reflects the importance of family holding companies in asset and tax protection is the possibility that, in some cases, the calculation basis for the Causa Mortis and Donation Transfer Tax (ITCMD) will be the book value of assets, rather than the market value, when donating shares in a company.
It is also worth remembering the expectation of an increase in the tax burden, especially with regard to the ITCMD, the rate of which could rise, as in the state of São Paulo, from the current 4% to up to 8% (with a progressive rate of between 2% and 8% if the current Bill 7/24 is approved and converted into law). Also to be taken into account is the fact that the Federal Senate is currently considering Bill 57/2019, which provides for an increase in the tax rate to 16%.
From a tax point of view, family holding companies offer great advantages. By pooling assets in a single legal entity, the tax burden can be minimized. For example, ITCMD is calculated based on the value of the assets at the time they are transferred to the company, which generally results in a lower tax base compared to what would be used in a future inventory. In addition, dividends distributed by the holding company are currently exempt from income tax and the payment of assets into the holding company’s share capital may, in some cases, also be exempt from Real Estate Transfer Tax (ITBI).
The governance structure established by a family holding company also makes it easier to manage internal disputes. Clear provisions, such as decision-making rules and dispute resolution mechanisms, can be included in the articles of association and shareholders’ agreement to minimize disputes and ensure a more harmonious operation. In addition, the presence of a board of directors, which can be made up of independent members, acts as an impartial intermediary and ensures that decisions are taken in a balanced way.
Another advantage of family holding companies is that they can facilitate the diversification of activities and investments. The centralization of shares and assets in a single entity by the holding company ensures that the investment portfolio has a unified and strategic vision. This not only simplifies management, but also allows the family to explore new business opportunities in a safer and more efficient way and to expand its activity in the market without compromising the protection of assets.
It is important to remember that the implementation of a family holding company requires a thorough legal analysis, which will consider: (i) the family structure, including the specificities of each family, and its objectives; (ii) which assets should be contributed to the company’s share capital; (iii) contractual and tax impacts; (iv) governance rules, among others.
Combining tax optimization, asset protection, dispute management and the promotion of investment diversification, holding companies have become an attractive solution for families looking for an integrated and efficient approach to managing their resources. It is worth remembering that each family holding company is unique and must be structured with legal assistance. Simply setting up a company without an in-depth legal study can lead to costs, bureaucracy and problems in the future. With the right structure, a family holding company can position the family for sustainable and secure growth in the future.
