As per current succession laws of India all [spouse, all sons and all daughters (including married)] have equal rights over all assets including business of family if proper succession documentation is not prepared.
A Will is written to distribute wealth accumulated from past income/investments/wealth management whereas Business Succession planning is relating to continuous flow of future business income to family. Business Succession planning is essential also to ensure that competent family member leads business management and ensures deserving business growth. As many as 95% family run businesses do not have Business Succession planning done or created the required succession planning documents for inheritance to avoid family dispute. In India more than 100 public listed companies are family promoted, owned or managed where huge wealth is at stake from family as well as from public at large. Hence, avoidance or improper business succession can ruin family’s future wealth from business.
There are various types of businesses like manufacturing, service providers, professional services, intellectual property rights in the form of shop, restaurant, dispensary, workshop, factory, office, cinema hall, law firm, agency, production house, book publisher etc. which are in different legal structures such as Proprietorship firm, Professional firms, Partnership firm, LLP, Private Limited Companies, Public Companies with its own constitutional documents like AoA, Partnership Deed, LLP Deed, Family Settlement etc. Further there are various laws related to real estate, stamp duty, wealth tax, gift, share transfer, inheritance based on religions / personal laws.
Each business requires to be mapped in a manner that future vision, growth path and succession is clearly established with a legal heir who has capabilities to take your vision forward with all knowledge, skill and maturity in the best interest of the family.
Business Succession planning requires in-dept study of all aspects by a team of lawyers, company secretaries, chartered accountants with other experts from HR and business side to advise the best suitable strategy from family and also names of legal heir/(s) with a clear road map. This is to ensure business succession plan is followed as per the plan and roles of legal heirs during the lifetime of business owner for optimum tax saving, smooth entry of legal heirs, proper delegations of responsibilities and authorities.
Major Documents for Business Succession are:
- Family Settlement
- Will
- Gift Deeds
- Power of Attorneys
- Share Transfers
- Real Estate Transfer
- Reconstitution of Partnership Firm
- Amendment of Articles of Association or LLP Deed or Partnership Deed
- Minutes of Board / Shareholders Meeting