Business transfers: The supporting role of governance

Business transfers: The supporting role of governance


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Published on 13 November 2018
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Business transfers: The supporting role of governance

The time has come to find a successor. Fortunately, your company has long adopted sound governance practices. Our team of governance experts explains how they facilitate the timely transfer of your company.

First observation: Selling a family business can sometimes be a complex process, and without the proper groundwork, the transfer can go seriously ary. Business leaders are not always equipped to manage every facet of the deal, which is why having your team in place ahead of this pivotal stage is so important.



Planning for the challenges ahead

For a first-generation family SME employing a number of family members, the key challenge is choosing a successor, which is no small matter for a founder looking to ensure the continuity of the business that so much effort went into building.

As for the second generation, the challenge facing business leaders is to segregate family from company interests. Decisions must often be made together with employees—family members still in the SME’s employ—and founders, when still shareholders in “their” company.

Whether the business is transferred to the next generation or to a third party, when several members of the same family work together in a business environment, emotions can run high, thwarting constructive dialogue. Feelings can muddy the waters and complicate the intricate process of transferring ownership of an SME (and its assets).

A change in ownership may cause a temporary disruption for the company, potentially setting employees on edge in the face of new business prospects. An adjustment period is to be expected to allow any turmoil to subside at the SME.

Ensure stability with a board of directors

Adopting sound governance practices can help mitigate each of these issues.

The board of governors plays a pivotal role in preparing for the sale of a company. Succession is a key concern for directors, who act in the company’s best interests. By leveraging board expertise, an entrepreneur gains independent advice from seasoned professionals. 

Throughout the transition, the directors will ensure that the strategic plan is being properly implemented, monitor the financial integrity of the company and assess the effectiveness of the new leadership’s management—a welcome source of peace of mind!

Entrepreneurs commonly underestimate how time-consuming the business transfer process will be, which is why support from proactive directors is so important. Where a company has no board of directors, the business leader is well advised to assemble a team of advisors with hands-on business transfer expertise.