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At Argyle, it is our view that the only succession strategy that you can be assured will succeed is one that you design.  It is our experience that the succession process may give rise to unexpected twists and turns.  It is the strength of character of what all potentially affected individuals have designed that will be robust enough to be a successful and reliable succession strategy.

There is no common solution; nobody can create a one-size-fits-all.

However, there are common solutions to common parts of the succession issue.  For succession events caused by death, total and permanent disability, or a trauma event, Argyle has the Argyle Buy/Sell Deed instruction package.  For a succession documented under death, total and permanent disability, or a trauma event this will give you an indication of our pricing and our timing.

Your succession process will likely involve three broad areas:

• personal succession for each member of the group;
• business succession for the equity ownership of business and associated entities; and
• management succession for the group.

These are not mutually exclusive; for example, it is often important that the members of the business succession require each other to have in place a personal succession plan. It is much easier to implement any business buy-out with delayed payment terms or discounted values if the family of a deceased or disabled business member is financially secure due to appropriate life insurance risk cover and personal estate and superannuation planning.

 

Whilst the three areas are best interlinked, they can and often should be looked at independently. Each person needs to design their own and their family personal succession plans. Ownership of passive investment or active business assets can be dealt with independently with separate rules for each, and these can be viewed independently of management succession.

 

It is often important to take the perspective of each role of owner, shareholder, manager, and employee and set the rules for each level.

Think about yourself and others. The rules you set for yourself and each other are the rules that will apply to all future participants, whether invited or family members.

 

A useful on-line tool to consider can be found at Business NSW.  This is an information and resource website paid for and supported by the Federal Government for the benefit of small to medium businesses.

 

Below we look at each of the three succession steps.

Personal Succession

 

Identifying Assets and Objectives

 

Personal succession essentially involves the determination of the form and realisable value of wealth owned and/or controlled by a person, the potential gaps and ways to complete these, and setting these against their personal objectives as to whom they wish to succeed to that wealth. It involves each person planning for the personal security and peace of mind of their own families.

 

This will ensure that the interests of all are secured in such a manner that there will be no expected personal family pressures that will flow back to adversely affect others.

 

With the benefit of this information, the next step is to prepare a personal succession plan which usually culminates in the preparation of an Advanced Will, Power of Attorney, Enduring Guardianship, Superannuation Review, and associated wealth direction documents. Often this will incorporate the adoption of a testamentary trust approach to passing the personal wealth or insurance benefit through the Will.

At Argyle, we have a range of tools to help you understand the process of personal succession.

 

For some, the non-wealth considerations are equally as important, such as who will be the lawful guardians of children.

Care is needed to ensure that your personal wealth is the subject of the guidance that will enable your objectives to be met. This may include you:

• nominating who will be the appointer/guardian/parent with respect to a family or discretionary trust;
• completing a binding superannuation nomination or avoiding/cancelling one to maintain flexibility; or
• directing who will be a director of family companies.

You can ask for the Argyle Personal Succession Will instruction package by emailing us at the address above.

Business Succession

 

Above, we note that there are common solutions to common parts of the succession issue. For succession events caused by death, total and permanent disability, or a trauma event, Argyle has the Argyle Buy/Sell Deed. Contact us for more information or a copy of our instructions package for Argyle to prepare an Argyle Buy/Sell Deed for you.

The ease and simplicity of this urges that these issues should be dealt with quickly and the other business succession issues looked at later, but not much later. The starting point is to document the succession strategy and identify the issues and challenges. The only practical way of identifying these is in an open and frank communication, pursued over several meetings.

 

This is especially important for succession planning among those where there exists non-business relationships such as family members.

 

The value of a properly constructed succession plan cannot be understated. It provides the guidelines against which future decisions can and will be made. Often the result of having the guidelines is that the “wandering thoughts” never arise or at least these do not surface because all participants know what the rules are, because they were part of developing these.

At Argyle, we have some useful tools that you may benefit from in the design of the non-death/TPD/trauma aspects of your succession. Contact us at the email address above for more information or to receive the tools.

Management Succession

 

Designing the Succession Documents

 

Following the initiation process, the next step is for all to agree on the future management of the business entities.  You will be designing the terms and conditions that are to apply to all of you.

 

But remember, the agreement is not just for you.

 

It is intended that what you agree will not only apply to you but also any other permitted persons who own or control shares or interests in the business and its associated assets. You should keep this in mind because while some answers and solutions to potential problems may seem obvious to you, they may not be obvious to others.

 

There is also the generation transition time. For example, how should the survivor of one generation interact with the next generation of business owners?

 

We expect that following the initiation process, all of your objectives will be apparent to all parties and agreement would have been reached regarding the essential control issues of the business. That is when you can get us at Argyle involved again. Simply tell us what you have broadly agreed to and we can prepare the terms pursuant to which your personally designed succession strategy will operate. Contact us and provide us with your essential information so that we can assist you further with your objectives. With the benefit of your essential information, we are in a position to determine what our costs may be for you and when we can fulfil your expectations.

 

Having regard to this outcome, we may then advise the most appropriate process and structure to carry out the business successions in a tax effective manner. If you request this, we would undertake this in cooperation with your usual professional tax advisers.

Do Not Let Tax Get In The Way!

 

We know that tax issues are very important; that is why at Argyle we have highly trained and experienced tax professionals who are well recognised by accountants, lawyers and financial advisers from Australia and across the Pacific. But in your succession objectives, please do not let taxation considerations or the current structure of your business get in the way of your decisions. If you allow this to happen or try to guess as to what you believe will be the taxation implications, you will not be capable of progressing and you will become stuck in the process when it is the outcomes that you need to focus upon.

 

You do not need to think tax; this is what your professional advisers will do for you.

 

The succession process you are about to embark upon is an interactive process between each of you and also with your professional advisers. Put another way, your job is to tell your advisers what you want to achieve, without fear or favour of the legal and tax implications. The professionals are then responsible for finding the best legal and tax efficient ways to achieve this for you. Your professional advisers will also suggest variations on the themes that you will have developed. You are then in a position to accept or reject or otherwise modify your thoughts and directions, but you will be doing so in an informed manner.

 

Again we urge you, do not let tax get in the way! Our experience is that if you make decisions based on what you believe are the tax or business structure issues you will miss out on opportunities to achieve your important objectives.

 

We congratulate you on getting to this point. The most difficult thing about succession is starting; by reading to this point you recognise the need to start. You can do this by:

 

• downloading an Argyle Buy/Sell Deed instruction package;
• asking us by contacting us about the tools that we have that may assist you; or
• simply calling us to discuss what you are looking for and what we can provide.