Tatiane Bagagí Faria
Lawyer at Marcos Martins Advogados
Currently, many companies in the Brazilian market are still run by family members and, by tradition, are passed down from parents to children, who continue the business activities. According to IBGE data , family businesses account for 90% of the country’s enterprises, demonstrating that this structure is very common in business companies.
Faced with this scenario, many implications arise in relation to the transmission of assets to heirs and the problems that such a situation can cause in the continuity of the enterprise, as well as in the management of the company’s assets and liabilities, in addition to directly affecting the family relationship of those involved in the business activity.
Because of this situation, succession planning is an effective tool, as it seeks to define the succession of assets before the death of the managing partner. In this way, the legal transfer of assets to the heirs avoids the need to discuss the transfer of assets in an inventory procedure, which can often be detrimental to the company’s activities and to harmony between the heirs, which can often lead to the closure of business activities.
Therefore, from the moment the interested party chooses to carry out succession planning, they should receive the support of specialized legal advice , which will carry out a survey of the assets, with an assessment of all the assets that should be transferred to the heirs. In addition, an analysis will be made of the family structure and the particularities of those involved in succession planning, in order to maintain, above all, family harmony in the work of the company, as well as the continuity of business activities, with a view to good financial health and legal certainty.
Once it has been decided to proceed with succession planning, it is necessary to choose how to materialize the succession of assets. Currently, the most common measures adopted by family businesses to carry out asset succession are:
A) DONATION OF ASSETS: understood as an anticipation of inheritance, it is the possibility for the interested party to allocate their assets to their heirs while they are still alive, transferring them free of charge. It must be done by drawing up a public deed, through the courts or out of court. It is possible to include the reservation of usufruct, which is the proviso that the donee will not be able to profit from the asset while the donor is alive. However, it is important to pay attention, at the time of the donation, to the need to respect the legitimate rights of the necessary heirs and to pay the taxes levied on the transaction;
B) TESTAMENT: a case in which the holder of the estate to be succeeded has the option of dividing his assets according to his own wishes, expressing in a public or private document how he wishes to see his estate distributed after his death, provided that the share of the reserved portion and the share free to dispose of are respected. It is one of the most widely used instruments for transferring assets, but requirements must be met in order for it to be legally valid, and specialized legal advice should always be taken when drawing up a will;
C) FAMILY HOLDING: this is the creation of a family company that holds all the assets to be transferred to heirs in the future, managing the capital of other companies, making it possible to control the assets of individuals within the family. In this modality, it is possible to define each heir’s share by means of shares or a contract, with a view in particular to maintaining and protecting the assets to be inherited.
In addition to the measures mentioned for the purposes of inheritance, there are other possibilities that can be adopted, depending on each case, always taking into account the particularities of the assets to be succeeded, especially the financial life of the legal entity, as well as the family relationship, always aiming for an amicable and safe division for the financial health of the company.
The importance of succession planning in family businesses is supported by the protection of assets when it is possible to organize them in advance, avoiding the financial and psychological strain of the probate process. In addition, depending on the method adopted, it is possible to reduce the tax burden of paying ITCMD (Tax on “Causa Mortis” Transmission and Donation of Any Goods or Rights) and other taxes, as well as ensuring the continuity of business activities in a legal and practical manner.
Marcos Martins Advogados is aware of this issue and is prepared to provide qualified legal advice on succession planning.
