Family Business Succession

Faced by the challenges arising from the ever-changing external environment and the severe competition in the market, it is necessary for a family business to formulate appropriate corporate strategies and have them implemented effectively with various strategic tools (such as merger & acquisition, equity financing, and debt financing) in order to survive and develop sustainably.

Good corporate governance is the prerequisite of sustainable development. Corporate governance involves such issues as the exercise of shareholders' rights, the composition and structure of the board, risk management and compliance, and incentive schemes for senior management.

The core of family business succession is leadership succession, which involves such issues as selecting the right person to be the successor, providing suitable training to the selected successor, and transferring powers to the selected successor.

Merger & Acquisition

Merger & acquisition involves a company acquiring the target company’s shares or business assets and is a strategic tool for family business development. Through merger & acquisition, the family business can achieve various strategic objectives, such as obtaining a higher market share and a broader customer base, gaining access to new technologies, products and distribution channels, and diversifying businesses. Acting as the project manager, we assist clients throughout the whole process, from strategy formulation to post-acquisition integration. Our services include:

identifying appropriate target companies
arranging acquisition finance
coordinating the work of various professional parties involved
assisting senior management in reviewing acquisition and financing documents
advising on strategic issues and project risk management

Debt & Equity Financing

Financing is essential for the operation and growth of any business, including family business. The two financing options most pursued by companies are debt financing and equity financing. The former refers to the borrowing of funds which must be repaid with interest whereas the latter refers to the raising of funds by issuing shares in the company. Each option has its own advantages and disadvantages, and most companies use a combination of the two options in their financing strategies. Our services include:

advising on the selection of financing options
advising on the structure of loans and equity investments
arranging loans from banks and private funders
introducing financial investors, such as private equity funds and private investors

Risk Management

Risk is part of life and family businesses face multiple risks, which can lead to operational disruption, reputational damage, financial losses, or in the worst case, business failure. Risks may arise from factors relating to staff conduct, organizational process, suppliers and customers, financial transactions, regulatory compliance, and so on. Effective risk management gives family businesses a better understanding of the kinds of risk they face and their potential impact, thereby enabling them to make informed decisions about how to eliminate or mitigate risk. We assist clients in:

identifying risks and potential causes
analyzing and evaluating the risks identified
deciding how to respond to such risks
taking appropriate action to mitigate or eliminate such risks

Shareholding Structure

With the benefits of separate legal entity, perpetual succession and limited liability for shareholders, companies are the most popular vehicle for holding assets and running businesses. One of the critical concerns in family business succession is how to strike a balance between equality and fairness among family members, which involves such issues as how the family business should be owned, how the economic returns of the family business should be enjoyed, and how to ensure that the family business is effectively controlled and managed. These issues can be fixed with appropriate shareholding structures and shareholders’ agreements. Our services include:

advising on the appropriate shareholding structure (for example use of different classes of shares to cater for the need of different family members)
advising on the appropriate shareholders’ agreements that would ensure effective control and management of the family business without prejudicing the interests of family members

Corporate Governance

Corporate governance refers to the structures and processes for the direction and control of companies, concerning the relationships (in particular the distribution of rights and responsibilities) among the management, board of directors, controlling shareholders, minority shareholders, and other stakeholders. Good corporate governance contributes to sustainable development of family businesses. We assist clients in establishing an appropriate corporate governance system which would be commensurate with the stage of growth of the family business, particularly in the following areas:

division of powers between the shareholders and the board of directors
composition of the board of directors and its decision-making process
effective communication between the management and other stakeholders
protection of minority shareholders
incentive schemes for management

Family Governance

Family governance refers to the framework of interlocking principles, structures, policies, and practices that families use to make collective decisions, helping the owner family governs its relationship with the family wealth and the family business. It promotes fairness within a family, brings discipline among family members, prevents potential conflicts, and provides a structure for family cohesion and stability both for the present and the future. We assist clients in establishing an appropriate family governance system, including

drafting the family charter / constitution in conjunction with family members and advisors
forming the family assembly, family council, family office, and other family institutions
setting up ownership structure to support strong family governance
establishing formal communication channels that allow family members to share their ideas, aspirations and issues