Financial and ownership succession planning by Maltese family-owned businesses : an evaluation

Abstract

This dissertation deals with ownership succession of family-owned businesses and the various factors affecting such a particular transfer. These factors include business valuation and transfer procedures, taxation, retirement planning, insurance and professional assistance. Successful transfers of business ownership to heirs assure the continuous existence and commercial activity of the businesses. A survey was carried out among Maltese family-owned businesses operating in sixteen (16) different industrial sectors. The aim was to analyse the pre- and post ownership aspects of succession, as well as the most common risk exposures that can lead to business succession failure. The survey confrrmed that most of the family-business owners concerned did not have enough knowledge on how to deal with this business transfer problem and about certain taxation charges arising from this transition. There was inadequate or lack of planning for ownership succession which could lead to the family business demise due to the negative fmancial impact on the business performance. Another factor which could increase the probability of business failure was that several Maltese family-owned businesses were managed by the owners themselves, and thus non-family executives did not form part of the board, if the latter was present. Frequent meetings to discuss business succession issues should be held between non-family management, employees and family members as there could be some significant benefits when non-family directors or managers are present. The analyses showed that several family-business owners frequently made assumptions about what their heirs want but, by the time succession becomes an issue, these heirs might have very different career plans of their own. This could also result if the business owners failed to communicate or have been secretive about the plans for the family-business continuity.