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It is not easy to think about withdrawal from your own company you built up taking so many pains. It costs quite an effort to let go one’s life's work and to leave one’s position to somebody else. Much worse, however, is the idea that the survival of the company, for which one had worked so hard, might be threatened. More than 5,000 family enterprises are forced to close down every year according to the Institute for SME Research in Bonn (Institut für Mittelstandsforschung Bonn) , because no successor exists. No wonder the succession plan topic plays an important role for rating procedures.

This means: banks and savings banks make loans and the loan conditions also dependent on the issue of the entrepreneur’s provisions made with respect to his successor. You should:

- prepare the company for the transfer.
- secure the family assets.
- learn about all tax and legal components of a transfer.
- decide on a successor and train him.
- reflect concretely about your activities following your withdrawal from the company.

Good planning is indispensable

Formulate the goals you want to achieve upon transfer of the company – for yourself and together with your family. Also keep in mind the consequences of your decisions for your employees and their families. Develop a transfer strategy together with your successor. No change in business generations ever passes without friction. The interests of those involved are often conflicting. These differences should be compensated in a constructive manner, i.e. in dialogue and in the interest of both parties and in the interest of the company. Develop a concrete schedule where you coordinate your mutual goals. It should contain the entry date of the future entrepreneur and details on the future role of the previous holder as well as the point in time of retirement of the latter.

In addition, the plan should exactly stipulate tasks, competences, areas of responsibility of both successor and senior. The individual steps of transition and of the necessary accompanying measures up to the point of the final takeover should also be laid down along with their respective time and date. Deliberate whether the succession should take place successively or in one step. When and how is it wise to integrate the successor into the enterprise and its capital structure as an employee, executive or associate?

Consider the employees of the company as a critical factor of the transition of the enterprise. Pursue an open information policy and involve the staff where possible. You thus create confidence. Check when associates, executives or masters and the remaining staff will have to be informed and when the successor should be introduced to them personally.

By when should legal agreements and contracts have been concluded?

Do not plan too little common time of parents and children in the company in the case of family succession. It would, however, be even more dangerous if the common time was too long. Joint company management frequently leads to overlapping responsibilities and confusion among business partners and within the company. This is especially true if no clear rules with regard to responsibilities have been set up. For discussions between entrepreneur, successor, family, executives and employees ECKHARD PRUY UNTERNEHMENSBERATUNG offers moderator talks. They help to prevent and/or quickly resolve conflicts. It may be helpful to establish an advisory board for the succession plan. It can be consulted in regard to far-reaching decisions or act as an arbitration body in the case of conflicts.

Furthermore, setting up a company committee might also make sense if the entrepreneur wishes to maintain a certain influence, if the course of business should continue to be monitored even after the transfer or if essential responsibilities should not yet be transferred altogether to the successor. The committee may also include tax, legal, business and financial advisors of the house bank.

Making early provisions for the succession furthermore improves the quality rating, which is the basis for banks and savings banks for granting loans (BASEL III). The succession plan thus ranks beside proprietary capital rate and cash flow. This affects the raising of capital both for the going concern and for the transfer.

Tax optimization and implementation of concept

In close cooperation with us, our cooperation partner Mrs. Litzenburger will elaborate the
appropriate tax concept for your succession plan and will take care of the legal implementation
by means of an adequate form of contract. You will obtain A-to-Z consulting with us and our
cooperation partner in all business management, appraisal right, tax and general judicial issues
in view of the planning and implementation of your business succession.

As a tax lawyer, Mrs. Litzenburger will help you design a tax-optimized succession concept.
She will assist you as a recognized expert for inheritance law and will elaborate for you the
relevant succession and corporate law contracts for implementing your succession plans. The basis of all considerations in line with your succession plans should be a well-founded
assessment of your property and in particular, your company. As a certified accountant,
Mrs. Litzenburger will perform the necessary corporate assessment in keeping with the
standards of the Institute of Public Auditors in Germany (IDW = Institut für Wirtschaftsprüfer)
on your behalf.

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