Case Studies
Leaving your business to the children
Mr Smith sets up a manufacturing business which is very successful. He is married and has 3 sons who he wishes to bring into his business. They are all interested and each join the company in their early 20s at which point they were each given 10% stake in the business.
The father is now 55 and wishes to retire at 60 and go to live in Spain with his wife.
The sons are keen to take over but the father has reservations that they are capable and will work together satisfactorily without his restraining influence.
He does not wish to give them the business as he needs to take his capital out of it to enable his wife and himself to share their dreams and enjoy a comfortable retirement without ever having to call on their children for financial support.
Equally, the sons want a clean break from their father so far as the business is concerned as they fear that if not, he will interfere and continually wish to do things "his way", nor did they wish to jeopardise the excellent personal relationships currently enjoyed by all the families.
All parties are concerned that the business should not suffer and be denuded of essential capital in order for the father to be paid a fair return for his 70% share.
EASF would work with the family to ensure that:-
- The company was structured and organised so that the father was happy that the company could be satisfacorily run by his sons who would all have their own separate and distinctive roles.
- Any shortfall in the skills of the three brothers was resolved by additional training and/or recruitment before the father retired.
- Sufficient capital was earned and put on one side and/or injected into the business by the sons and if necessary, outside financing to ensure that the father was paid a fair market price for his shares when he was 60, in 5 years' time. Additionally, there was sufficient cash left in the business to enable it to function properly and effectively.
- If necessary an independent outside valuation will be obtained for the business at the point of the father's retirement.
- The company was in a position to grow and develop under the sons' control so that they in their turn could sell it, float it or pass it on to their families in due course.