The Government are concerned that bringing external investors into a family business can dilute the founders down below a 5% stake in a company. The 5% threshold may therefore hold back the seeking of external funds and therefore hold back growth in a business.
Crucially, succession must be an objective decision. Yet taking an impartial view of your children’s capabilities and drive won’t be easy.
Whatever your succession strategy, the need to start the process early can’t be overstated. It takes time to groom the next generation, or to find external appointees who are right for your business
Share options can be used which are granted on a selective basis and exit-only. This can be used to bridge the conflicting desires of management incentivisation with perceived loss of family ownership.