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  • Dorian Chin

Memo for entrepreneurs on planning business transfer in Polynesia

Many talented people have chosen to settle in Polynesia over the years; many of them have started their own businesses or prudently invested in real estate to build their wealth.

For entrepreneurs who live in Polynesia and have worked hard to build a successful business or real estate portfolio, handing over and planning for succession are major concerns.

Family conflicts relating to your transmission

Beyond the legal issues that arise during inheritance, whenever people in Polynesia own valuable businesses or real estate, there is also a risk that their heirs will disagree on what they owe. make these assets. This situation can be very worrying, because it can lead to conflicts or breakdowns in personal or business relationships.

The risk of conflicts may be increased when the assets of the transfer include a family business in which only some children participate. Indeed, heirs who do not work within the company often prefer to receive their share of other assets from the transfer and not to be considered as passive co-owners owning a minimal part of the company with their brothers and sisters who work there, even if they have voting shares.

Agreements between shareholders and co-owners can be useful to allow several owners to make harmonious decisions and avoid conflicts. Your legal advisor can help you determine their appropriateness and ensure they are drafted correctly.

Imagine you leave a large inheritance, but your children stop talking to each other because of the way the inheritance was structured. This is one of the unintended consequences that can occur when families do not plan adequately. By mitigating the risk of misunderstandings or surprises, proper wealth planning can enable the smooth transfer of assets from a family business or large property portfolio to succession.

Importance of a plan for your business transition

Families with substantial assets should consider planning early to determine how best to pass assets to their loved ones and manage potential expenses.

In response to the growth of successful family businesses in Polynesia, a new planning service, business transfer planning, has emerged.

Many business owners and entrepreneurs expect to transfer management or ownership of their business to the next generation. People who are not considering passing on their business often consider selling or attracting new shareholders. Yet despite all of these significant changes being considered, many business owners simply do not have a formal succession plan in place.

Since a family business or real estate portfolio can be the most valuable family asset, it is essential to develop a thoughtful transfer plan as early as possible.

What is business transfer planning and why is it important?

Business transfer planning involves two main aspects: a plan to transfer ownership of assets and the transition of business management. Often the two go hand in hand (i.e. ownership is left to the person who will manage the business). However, in some cases, a family may retain ownership of the assets, but hire a professional manager to manage them, if that makes more sense.

Business transfer planning involves establishing a framework for the transfer of ownership and management of the business or valuable real estate to chosen successors, whether family members, business partners or shareholders, a professional management company or third parties. Likewise, it is a plan that seeks to maximize value, family harmony and overall security for all parties involved.

What does a business transfer plan consist of?

A well-considered business transfer plan is based on a comprehensive assessment of all relevant elements that need to be considered and implemented for the asset transition to be successful. Typically, an assessment for transmission planning may include the following:

  • Exit strategies before or after the handover.

  • Management transition plan.

  • Point of view of different stakeholders and what they would like to see happen.

  • Business Valuation and How to Maximize Value Before an Exit.

  • Planning before retirement.

  • Buyer Financing.

  • Discussion of strategies and tools related to transfer planning (e.g. wills, powers of attorney).

  • Explanations regarding life insurance.

  • Possibility of selling the business (e.g. selling within the family or outside) and identifying people who can help sell the business.

  • Find the direction that best suits your business.

Owner-managed business transfer planning usually includes a management transition plan.It may include a list of tasks, including:

  • Set Exit Delay for Current Owners or Managers.

  • Determine the skills required for a successor.

  • Establish compensation to determine if there is a suitable internal candidate or whether an external search is required.

  • Discuss the handover plan with the proposed candidate and the board of directors to establish expectations.

  • Discuss the transfer plan with the senior management team, prepare the successor to take over, communicate the succession plan to third parties and implement it.

Normally, the management transition is one of the longest and most complex stages of implementing a transfer plan and can take several years. If the potential successor has only part of the skills needed to succeed, he or she should receive training, where possible, or qualified managers should be hired to fill the gaps. In the case of a family business where the next generation (e.g. the owner's child) wants to participate in management activities, but does not have all the skills necessary to succeed, it may make sense to sell part of the actions to experienced members of senior management who are not part of the family to fill the additional skills required. Another option is to put in place compensation or incentives to retain externally hired managers whose skills are essential to successfully complete the transition.

When is the right time to plan your departure?

It's a good idea to plan well in advance of retirement and may require making arrangements for various future scenarios. For example, before a possible illness, before the family may need liquidity, to diversify the family's risks and avoid concentration, when the successor is trained and ready to take over, when the markets ensure a good valuation and that there are enough buyers, before declining market conditions deteriorate the value of the business or when partners or stakeholders mention that they are concerned about succession.

Who should you turn to for advice?

Business transfer planning is a relatively new area of specialist advice and can be carried out through professional advisers or financial services companies who have specialists in transfer planning and insurance advice.

For example, call on Polynesia Wealth Gestion de Patrimoine to start implementing your plan, a company specializing in financial planning and asset management.

Benefits of implementing a transmission plan

Business owners who do not have a transfer plan often find various excuses. Often they say they don't have time to plan, it's too early to plan, the process is too complex, they can't find adequate advice or tools, they do not want to leave their business at the moment or are afraid of causing family conflict. However, the potential benefits of implementing a well-considered business transfer plan are numerous, including:

  • Help ensure a smooth transition and prosperity of the business or real estate portfolio.

  • Maximize the value of the business or real estate portfolio.

  • Reduce transition costs.

  • Ensuring family financial security.

  • Preserve family harmony.

  • Inspire confidence in family, management, staff, customers, suppliers and other stakeholders.

Start your transfer planning today to protect your assets and the future of your business or your real estate portfolio.

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