Succession planning and reorganisation in family businesses

Proposed changes to agricultural property relief (APR) and business property relief (BPR) have been a catalyst for family businesses to review their succession plans. Advance planning is essential for a successful transition and it can take time to put the right arrangements in place. 

We have summarised below three recent family business reorganisations which we have worked on and some of the lessons that can be drawn from them.

Succession

Prior to the Autumn 2025 Budget we helped an established family business implement its succession plans. The parents wanted to start a process of stepping back from the business, handing ownership and control to their children. Our work included advising on:

• transferring shares to the next generation (including creating new growth shares to assist with IHT planning)
• governance of the business going forwards
• transferring assets used by the business (primarily properties occupied by the business) into the company’s ownership
• the creation of new family trusts
• new wills for all family members and
• pre/post nuptial agreements for the children.

While there were a lot of details to be coordinated, the family benefitted from a longstanding relationship with a key advisor who knew the family and business extremely well and was able to guide discussions. The family all worked in the business and were closely aligned in their thinking.

An important part of the process was ensuring that everyone understood and agreed the proposals before starting to prepare documents. This involved a detailed planning paper which summarised the family’s aims and the steps to achieve them, including a clear description of the proposed new governance arrangements. This document was discussed in detail and updated over several weeks to reflect the final, agreed approach.

In this case, the aim was to complete all arrangements pre Budget and this was achieved through a number of visits to the family to discuss details and coordinate signing and completion of the various steps.

Structuring

This matter involved a large third generation family business, looking to reorganise with a view to long term succession planning. This work followed a large corporate reorganisation which we implemented for the client a few years previously. The aims of the reorganisation included:

• further simplifying a complicated corporate structure
• creating a new family trust to hold a majority interest in one of the main trading companies (including considering governance going forwards)
• transferring minority shareholdings to the next generation (none of whom were directly involved in the business)
• leaving a small percentage of the shares in the hands of the parents’ generation, some to be held indefinitely and others to be available for transfer in the future, possibly either to an investor or, potentially, to an employee benefit trust.

As the values were significant, timing was also linked partly to valuation and obtaining insurance cover in respect of potential IHT charges.

In this case, much of the discussion was led by our tax and trusts team. Planning, again, was based around a discussion document setting out the current position and the proposed position following the reorganisation. This was discussed and updated to show conclusions reached as part of the planning process, until there was sufficient detail to produce the necessary documents. 

Succession

We recently completed the reorganisation of a family farming and land owning business. Through a group of companies, the family owned significant amounts of land, some of which potentially was suitable for development.

The reorganisation was driven by timings:

• the older generation wished to retire but needed to retain a significant interest in the business for their financial security
• a large number of shares were held in old and complex family trusts, the professional trustees of which also wanted to retire
• the governance arrangements of the group were outdated (for example, the rights of some classes of share related to assets which no longer existed)
• the possibility that some of the land might be suitable for development made it prudent to pass value to the next generation in advance of any further discussion around development. 

Overall, it was agreed that the transition presented an opportunity to make the structure clearer and simpler for the next generation. Since the next generation consisted of a relatively large number of individuals, it was important that the new governance arrangements were clear and robust.          

Our tax and trusts team led the initial planning exercise, working closely with the family’s longstanding accountants. For tax reasons, the reorganisation involved a number of steps to implement a demerger. The work also included transferring property between group companies and coordinating steps between a large number of shareholders and trusts. A key factor was communicating with all family shareholders (particularly those who had limited visibility of the complex existing trust structure and share rights) to ensure that they understood what was being done and were comfortable signing documents. This included explanatory notes and calls/emails to answer questions as the matter proceeded.  

Conclusions

The examples above give a flavour of three matters we have recently worked on for family business clients. What lessons can we draw from these?

• Start planning early: Family businesses are often complex, and aspects of their structure and governance may go back many years so it can take time to gather details and really understand the background. Trusted advisers (in particular accountants and trustees) often hold a wealth of information.
• Be realistic about timings: It can take time to gather information, consider aims, discuss options with family members and obtain specialist advice (eg on tax, real estate, valuations etc)     
• Tax: consider who will lead on tax advice as this is always a key driver.
• Advisers:
  • it is important to have experienced advisers who work closely together and can manage multiple specialist aspects under one roof. For example, in each the matters above we advised on tax, trusts, corporate aspects, family law and real estate. 
  • it helps to use advisers who have experience in similar work and can explain how other family businesses have approached similar issues. There are numerous alternatives in any reorganisation, and it is invaluable to have advisers who can speak from experience about what works best.
• Think broadly: transition to the next generation is a good time to think about the business as a whole, to ensure that the next generation receives a business that is well organised and not hobbled by outdated arrangements. It may be a good chance to consider whether assets are held in the right place, to review old trust arrangements or to revise articles of association.
• Be flexible: No two families or family businesses are the same, so flexibility is key. There is a virtue in ‘keeping things simple’ but equally where there are a large number of family members and a diverse business it’s important to recognise where more detail is needed. The governance system that is being put in place will hopefully last many years so advisers need to look ahead to consider how it will work in 5, 10 or 15 years’ time.
• Make a start! The unexpected can happen and it can be hard to start planning when decisions are needed quickly. It is worth starting to discuss plans as early as possible.