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Transfer of a Family Company to the Next Generation

Case Study | Mar 13, 2015

The Problem

The founder of a successful business wished to retire and have his son and daughter succeed him in owning the business. To fund his retirement, the founder needed to realize the value of the business, but his two children did not have sufficient capital to purchase the business from him.

Our Approach

We undertook a corporate reorganization that exchanged the founder’s shares in the corporation for newly created frozen value shares of equal value. We then drew up an agreement between the founder and the corporation, under which the corporation would purchase an agreed-upon percentage of his frozen value shares annually. This permitted the founder to receive the value he had built up while the business (now owned by the son and daughter) paid that value out to him over a manageable period of time.

The Result

When the term of the agreement was completed, the founder had the value he had built up in his business during his career in his hands and his son and daughter owned the business, having paid for it out of the earnings from the business over time. Most importantly, through the use of clear and understandable agreements between the founder, his children, and the corporation, family harmony was maintained.

© 2015 Lawrence, Lawrence, Stevenson LLP

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