Why business succession begins five years before the handover

Anyone wanting to arrange the succession of their company thinks first of the person: who will take over? A child, an employee, an outside buyer? This question is important. But it is not the first one. The first question is: is my company actually ready to be handed over?

Ready for handover means: legally sound

A company is ready for handover if a third party could buy it without the owner having to be present every day. That has an organisational side and a legal side. Legally it means: the articles of association are up to date, contracts with customers and suppliers are in writing and transferable, the property is separated from the business or deliberately kept within it, and there are no unresolved claims from family members or former partners.

In practice, something is almost always missing. A lease that is in the owner's personal name. A shareholders' agreement from the founding years that makes no provision for succession. A spouse who has a share in the company through the matrimonial property regime without anyone having thought about it.

What happens in years five to three

Taking stock. Who are the possible successors, which routes are open, what do the articles of association, contracts and matrimonial property regime say? From this emerges a list of areas for action. Typical ones are: separating the business from the property, cleaning up contracts, adapting the marital and inheritance contract, arranging representation. These steps take time, and some are subject to tax deadlines. Anyone who, for example, takes a property out of the company triggers tax consequences depending on the constellation, which can be avoided with sufficient lead time.

What happens in years three to one

Structure and contracts. Now the chosen route is built: purchase agreement or gift, advancement of inheritance with an obligation to bring it into hotchpot, shareholders' agreement between the outgoing and incoming owners, transitional arrangements for management. In a succession within the family, the question of the non-succeeding heirs is added: how are the siblings who do not take over treated? Inheritance law sets limits with the compulsory portions, and within those limits a solution can almost always be found. But only if it is deliberately designed.

The final year

Completion. Signature, commercial register, handover of responsibility. And arranging what comes afterwards: does the transferring owner remain on the board of directors? Does he or she receive an advisory mandate? For how long does he or she remain available to customers? These questions determine whether the handover succeeds for everyone involved.

And if the five years are no longer available?

Then it can be done faster too, with less room for manoeuvre. But one thing should be settled immediately in any case, regardless of the time horizon: the ability of the company to act if something happens to the owner. An advance care directive (Vorsorgeauftrag) and clear rules on representation are the first step in any succession planning. They cost little and prevent a standstill in an emergency.