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Business Succession Planning in Germany: Corporate Lawyers

Having built a successful business, it is often a challenge to safeguard the company and ensure that future generations can benefit from its continued growth and prosperity. Business succession planning is a vital consideration for entrepreneurs in companies of all sizes and receiving expert advice is critical when making the right decisions. At Schlun & Elseven Rechtsanwälte, our lawyers will advise you on the options available to you, oversee the legal requirements to follow through with the desired plan and provide creative solutions based on your goals and your company’s characteristics.

At Schlun & Elseven Rechtsanwälte, we are a full-service law firm with offices and conference room facilities around Germany. Tailor-made solutions and customer satisfaction are central to our firm’s philosophy whether we are working with private or business clients. Contact us now using our details below to receive specialised advice.

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Our corporate lawyers advise on all matters of business succession planning.

As a full-service law firm, Schlun & Elseven will oversee all the legal requirements

Our Services in Business Succession Planning

At Schlun & Elseven Rechtsanwälte our full-service approach ensures that we can guide you through all the requirements within business succession planning. Our team will examine the options available to you and determine which course is best suited to your aims. Every company and situation is different, and therefore our commitment to tailored solutions is crucial in this matter. Careful planning is advised but may not be possible due to changes in circumstances. Our lawyers work efficiently and as experts in the field we can be relied upon to provide you with the necessary guidance in the decisions made.

Should you decide on making the transfer during the course of your lifetime, we will support you in overseeing the requirements such as by examining whether the company’s articles of association allow you to make a gift to your successor or by having your successor acquire the required shares within the company. We will analyse and outline the legal implications of the chosen route of succession. As lawyers with expertise in the fields of corporate law and inheritance law we will make the process as straightforward as possible.

If the decision is to have a family succession, our team will support you in the design of a family foundation to protect your assets. We will advise you on the tax implications and the asset succession concepts within these structures. Such family foundations can be flexible and designed in your interests. Allow our team to design one fitted around your goals. We also advise on matters such as

If the sale of the company is the preferred route, our corporate lawyers are experienced in matters of mergers and acquisitions in Germany. Facing the sale of a company can be a daunting prospect, especially for those who have not previously being involved in one, which is where our team’s service is of value. We will support you with the required due diligence, the preparation and review of contracts and sale and purchase agreements and advise you on the preferred route for the M&A transaction or on the sale of the company generally.


The Importance of Business Succession Planning

Business succession planning is crucial in ensuring a future direction for the business. All too often, successful businesses in one generation do not progress into the next generations, and major problems can arise due to rushed and ill-advised decisions on who should take the reins of a business. Successful business succession planning also allows you as an entrepreneur to make long-term strategic decisions for the company now, knowing that it is in safe hands for the future. Our lawyers will support you in making the big decisions necessary. Here is advice we can offer on the issue.

Plan Early for Business Succession

Planning early ensures that you can identify the right person to continue on the company. Maybe that person is within your family, or maybe it is an employee or someone already in a key management position. If there is no-one identified as suitable to take the role, it may be worth considering selling the company. If there are a few suitable candidates, it can be beneficial to place them in strategically important positions and give them greater responsibility within the company. This will determine whether they are ready to handle the most important roles in the future and provide an insight into what they value.

Another benefit of early business succession planning is that the potential successor can receive mentoring and assistance in preparing them for the role. It can even be worth getting input from the potential successor as to the design of the mentoring program. A suitable successor may recognise their own weaknesses and areas in which they need further development. Should the mentoring program demonstrate that the person is a suitable successor, the entrepreneur can start transitioning them into more important roles with key partners and suppliers.

Early business succession planning allows the entrepreneur to timetable the transition to the successor. Having a plan with milestones and indicators provides the successor with goals to meet and also provides further insight into their capabilities under pressure. Having set goals and objectives stabilises the transition plan, allows the successor to know that they are on-course, and provides clear signs as to how much control can be relieved. Open discussions with the successor are advisable, and the plan should not need to be “set in stone”. The business environment can change, and the plan should remain flexible. It needs to be reviewed regularly. However, clear avenues of communication are the best means of preventing conflicts arising, especially around the feeling of “moving the goalposts”.

Document the Business Succession Plan

Like early planning, carefully documenting the business succession ensures that it is carefully planned out and provides you with peace of mind. Working alongside the corporate lawyers at Schlun & Elseven Rechtsanwälte will ensure that there is a paper trail and that key considerations such as the required insurance plans, taxes, bank accounts and corporate structures are documented. Our team will help you lay the groundwork for the succession by taking care of the legal formalities. For succession planning within a family, our inheritance law specialist, Dr Thomas Bichat, will advise you on German inheritance law requirements.

Careful documentation allows for changes and adjustments to be made when necessary. Changes in tax law or in inheritance law can result in certain approaches needing to be altered. Other factors such as unexpected growth or decrease in the company, and even the chosen successor no longer being able to take the role, can also lead to changes in the plan taking place. Working with our experienced corporate lawyers ensures that whatever changes do arise during the business succession planning, our team is ready to meet the challenge.


Options for Business Succession Planning

Determining the appropriate approach for business succession planning is crucial to its success. Picking the right person to carry on the company can often be difficult and is determined by many factors. Although choosing a family member is often the preferred route of entrepreneurs, it is not the only means by which they can choose a successor. Family members can have other interests and may not have the aptitude for running the business. Employees or others within management may be more capable, or selling the company may be seen as how disputes can be avoided. Here we will outline some key considerations when determining the route to pursue in business succession planning.

Keeping it in the Family

Many businesses in Germany are family-run, and for this reason, it can be tempting to keep it within the family. Such a move also may seem like an easier decision on the part of business succession. However, such major decisions need to be made calmly, and the business’s best interests need to be placed at the forefront. Often emotional considerations can cloud judgement and lead to bad decisions. The advantage of having a family member as an heir is that entrepreneurs can prepare their family members for running the company. They can get a clearer insight into what the heir may plan for the business going into the future. The advantage of keeping it in the family is the successor may have loyalty to the company and may be determined to maintain and grow the family company. Such characteristics may not be present when the company is sold, or an outside person is brought in to take its key role.

If family succession is the chosen route, then calm decisions based on solid considerations need to be prioritised. In families with more than one possible successor, decisions will need to be made on who the successor is or how the succession will occur. Early planning and open discussions need to be considered here as late planning, or a lack of a clear plan can lead to chaos. Determine and consult with trusted advisors about which of your family members displays the required skills and aptitude to make the big decisions and bring the company forward. Consider which of your heirs have the necessary skills, experience and leadership qualities for the role.

On the succession front, it may be worth considering buy-sell agreements where heirs who are not interested in running the business can be bought out by those who are keen on it. Such a step should be considered as a means of avoiding future disputes. Our lawyers can advise you on all of the options available to you when planning for family succession and oversee the paperwork to make it a reality.

Passing to a Business Partner/Business Partners

Often, businesses are founded by more than one entrepreneur, and passing your share of the business to your business partners can be in the best interests of the business. Founding business partners have already demonstrated their qualities and abilities in running the business and may appear like a safe pair of hands for future business success. With close business partners, the advantage is that you can often trust them and determine their plans for the company going into the future.

Allow our team to advise you on the key considerations in such a step. We would advise communicating with family members and those who may have considered themselves potential heirs to ensure that the reasons for the decision are outlined. When communicating with your business partners, our lawyers will support you in designing the necessary agreements with your business partners. As expert negotiators, our team will ensure that your aims at the forefront of any plan. We will also conduct the necessary due diligence when determining the value of your business for the sale of your share to your business partner(s).

Business Succession Planning: Key Employee or Management

It is not uncommon for the person most able to take the reins of the company to be within the company itself. Identifying a key employee or someone within the management structure who can continue your work can be difficult. Key considerations should be whether they have performed at a high level for a longer time period, have a consistent drive for success, possess the necessary leadership qualities and have a commitment to the company’s mission and values. Should a key employee have the necessary characteristics, experience, and track record to be considered as a potential successor, providing them with the opportunity to grow and giving them important responsibilities at the right time is important.

An experienced employee can bring ideas from elsewhere into the business. Having dedicated their working lives to that industry, they may be best placed to acknowledge the current trends and future opportunities. Their fresh approach may be what your business needs going into the future. As with all aspects of business succession planning, clear communication, and a detailed plan must be at the forefront of considerations. Impartial advice from outside sources is recommendable when making such decisions.

Selling the Company

Selling the company needs to be considered should no obvious successor present themselves. This can be a difficult decision for entrepreneurs to make, especially when they have dedicated themselves to the success and growth of their business. The right sale can lead to you and your family getting the benefit from that hard work, and it can allow you to plan for retirement in confidence. It should be noted that many small and medium businesses do not enjoy easy successions and selling the company may be the solution where no-one displays the required aptitude for future business success. However, selling a business can bring its own complications and is the most unpredictable of the above options.

Our lawyers will provide the expert guidance needed when selling a company. Our team will carry out the necessary due diligence to determine the value of your business and closely examine those who are interested in purchasing the company. Assessing your company’s value will cons