Plan the generational change in good time, especially in times of crisis
The general recommendation for generational change is to always start the preparations well in advance. With the right transfer structure, you can save both money and, not least, trouble.
In the event of a planned change of generations, you can make use of various transfer methods, including:
- Transfer by gift (in whole or in part).
- Transfer in connection with restructuring.
- Transfer with tax succession (acquirer enters the tax position of the owner).
Many of the reasons that are usually at play when considering restructuring your company also apply, of course, even if there are times of crisis. It may be because a generational change awaits, because you want to separate an activity with a high risk, or because you want a better structure in the company. In certain cases, the crisis can concretely increase the need for or desire to restructure.
Tax matters
Tax succession at company and shareholder level may be preferable to transfer taxation. Especially in times of crisis, it should be considered together with one’s adviser whether it would be advantageous to make the restructuring taxable.
If there is a need to restructure as part of the generational change, the lower values will reduce the need for the restructuring to take place tax-free. If the restructuring is not to take place tax-free, the restrictions that a tax-free restructuring would otherwise entail can be avoided.
Eg. will be able to save a lot of time for carrying out the generational change if the holding requirement can be avoided for 3 years after a tax-free restructuring.
Risky business
The crisis can also change the assessment of what constitutes a risky company, and thus increase the focus on separating companies into several different independent units.
If you have clear expectations in good time that one business branch will do well, while another business branch is challenged in terms of earnings, an early restructuring will be able to separate the two businesses and thus remove the risk of the unhealthy business dragging down the healthy business . If you want the restructuring to take place tax-free, it is important to be in good time so that there are no large deficits or losses that are lost in connection with the restructuring.
If a company is under pressure from the economy, so that the company’s existence is threatened, the owners may want to consider whether, through a reconstruction, it is possible that the healthy part of the company’s business can continue. If the crisis is so serious that the company’s existence is threatened, it is rarely a good idea to carry out restructuring tax-free – especially if the profits found during the restructuring can be deducted from otherwise unused losses that will be lost in a tax-free restructuring. In these cases, it will often be most appropriate to sell the healthy part of the company to a new company. Depending on how serious the company’s situation is, such a reconstruction must also keep an eye on the insolvency law rules.
The ownership structure
Changes in ownership structure, e.g. in connection with the transfer of a company to the next generation, requires thorough preparation, not least in times of crisis. In the case of a generational change, the ownership structure can be changed at once or in several stages. The different forms of generational change all have both advantages and disadvantages and therefore require careful consideration. Here, it is important to consider both the economy, tax, law and the management aspects thereof.
Need advice?
If you need advice about the change of generations and the tax matters, contact us for a non-binding chat about how we can assist in ensuring the best possible transfer from one generation to the next. You can contact us on phone 5663 4466 or by email kontakt@dslaw.dk .
