Intra-family company succession – inheritance law restrictions?

• Inheritance Law
• Private Clients
• SME

Handing over one’s own company to a daughter or son has always required planning; this resulted in a will, marriage and/or inheritance contract. The potential changes to company inheritance law in the coming years will only make it marginally easier to hand over a company. Legal restrictions exist today and will continue to exist in the future.

The law of succession in force today

The current inheritance law options require careful analysis. Only then can the necessary wills be drawn up or a marriage and/or inheritance contract concluded.

Company succession remains a challenge (under inheritance law)

Advice on inheritance law requires the involvement of a lawyer. It is almost always a central concern of the parties involved to avoid the transfer of the company leading to renewed discussions about the valuation of the company (possibly years ago) upon the death of the testator. In our day-to-day advisory practice, we have already been able to work out suitable solutions for practically all constellations.

Company succession as part of private estate planning

Inheritance law advice covers the entire assets of the business family. If there are no objections, all affected family members will be involved in due course. Specialists in other fields should also be consulted on a case-by-case basis. Depending on the specific family situation, the formation of a “family council” could also prove beneficial. This could establish a culture for the development and support of family business succession.

What could the planned further revision of inheritance law bring?

A draft law has been in place since 2022. It is intended to favour (intra-family) company succession if the parties involved were unable to reach a comprehensive agreement in the form of an inheritance contract during the deceased’s lifetime. If the arrangements and agreements under inheritance law are not in the form required by law, an heir could demand the allocation of the entire company. If the payment of the equalisation claim of the co-heirs poses serious (liquidity) difficulties, a deferral of payment for a maximum of 10 years could perhaps be applied for.

In many, if not most cases, the company is transferred to a descendant during their lifetime. For this constellation, the draft stipulates that the business-critical parts of the company are to be recognised at their market value at the time of the transfer (provided that a professional company valuation has been prepared and submitted to a competent authority). This would lead to a desirable increase in the predictability of the transfer of the company during the lifetime of the acquiring descendant, provided that it was not possible to involve all heirs in the company succession in a legally binding manner during their lifetime.

Possible inheritance law reform(s) or not – for reasons of predictability and reliability, a solution involving all affected family members should be sought as before. Gaining the insight, willingness and trust of all those involved can be a challenging process. On this basis, the entire process can be moulded into a contractually binding form and imponderables can be ruled out. If this is not possible, the goal can be achieved by means of unilateral inheritance directives (possibly with contracts between individual parties).