Legal advice for generational transitions

Many entrepreneurs do not like to face the problem of planning the generational handover of the company and tend to postpone the start of a constructive delegation process. Continuity and succession are not considered priorities by the majority of Italian entrepreneurs who do not implement strategic planning. Several international researches show that:

• only 30% of family businesses survive the second generation,
• of these, 50% stop business within the third generation.

On average, only in 15 cases out of 100, therefore, grandchildren are able to manage the company created by their grandparents. Preparing in time for the generational change within your business, and implementing a gradual generational transition, can most often prove to be the winning strategy to ensure management continuity and not incur the termination of the company after the death of the founder. This extremely delicate process must be generated by a carefully conceived preventive action. This aims to create the ideal conditions for the ownership of the company to pass to the next generation, without compromising corporate competitiveness and family harmony.

The possible critical issues in planning the generational handover arise most of the time in the transmission of the roles of “shareholder”, “leader” and “manager”. Conflicts can often arise between these three figures and it is necessary to carefully evaluate the quality of kinship relationships as well as skills. The criteria for the transmission of these roles are, therefore, the first aspects to be regulated in order to protect the governance of the company and the harmony of the family. Furthermore, in planning a generational change, it is necessary to move within the framework of the strict limitations imposed by the law of succession to protect the rights of the entrepreneur’s family members, whether they are interested or not in the business of the company and not infrequently bearers of divergent interests.

The intervention of the legal consultant favours communication between different generations and facilitates the use of management and monitoring systems that encode the experiences of those who led the company. These will facilitate the successor to continue the business independently. de Tilla Studio Legale carries out for this purpose:

• the analysis and identification of the criticalities of the joint family / business system and the relationships present in it;
• examining the strengths and weaknesses of the company and its positioning in the market;
• the identification of suitable strategies for the development of the integrated family-business system;
• supporting the entrepreneur and successor in the transition period;
• the possible introduction of an experienced temporary manager to work alongside a family member, with a view to succession.

In the absence of family members who want to take the lead of the company, the choice is made for “external” generational handover methods that involve managers and employees.

In the generational change of a company it may happen that 4 generations are involved. These will include people who are at different stages in their life, in regards to motivation, success and job satisfaction. de Tilla Studio Legale assists companies in managing the different needs and objectives of the subjects involved in the change phase through the most suitable legal instruments for this purpose, such as:

• the introduction of specific statutory clauses;
• the establishment of a family holding company;
• the provision of family agreements;
• the provision of special categories of equity investments;
• the stipulation of shareholders’ agreements;
• the establishment of a Trust;
• the fiduciary registration of company shareholdings;
• the reorganisation of the corporate structure through extraordinary operations.