Company succession is the process of planning and preparing suitable candidates for key positions to ensure continuity of organizational operations in the event of the departure of current leaders. It is an essential element of a business strategy that allows for the maintenance of stability and growth of the company. In this article, you will learn what succession planning is exactly and how to effectively plan for it to minimize the risk of failure and achieve success.
Table of Contents
- Company succession – management board
- Company succession – a family foundation
- Company succession – a project of the Polish Agency for Enterprise Development (Polish PARP)
Company succession – management board
Act of 5th July 2018 on the succession board of a natural person’s business and other facilitations related to business succession defines the rules of the process. It applies only to entities entered into the Central Registration and Information on Business (Polish: CEIDG).
A succession management board is a form of temporary management of a company after the death of entrepreneur. It allows legal successors to make essential decisions. For example, regarding the continuation of business on their own, selling it, or closing.
Choosing a succession manager during the entrepreneur’s lifetime and notifying the CEIDG about it allows to:
- maintain full liquidity of the company’s operations,
- run the company by the succession manager immediately after the entrepreneur’s death,
- keep valid employment contracts with the company’s employees,
- maintain continuity in performing contracts,
- quickly obtain confirmation of the possibility of executing licenses or permits.
The succession manager is responsible for running the business until the succession is settled. The succession management board expires within 2 years from the entrepreneur’s death. The court may extend this period for important reasons for no more than 5 years.
The succession manager can be a natural person with full legal capacity. A legal person cannot hold this function. Furthermore, only one person at a time can be a succession manager. But, the entrepreneur can choose a successor who will be appointed if the current succession manager resigns from the position or can no longer perform it.
If a succession manager is chosen during the lifetime of the entrepreneur, there are two options:
- to appoint a succession manager,
- to stipulate that the designated commercial proxy will become the succession manager upon the entrepreneur’s death.
Appointing a succession manager requires the consent of the designated person. Reporting this fact to CEIDG is also necessary.
Family businesses made a significant contribution to the work on the Act on the succession management of a natural person’s enterprise. They also had an influence on other facilitations related to business succession. The Act’s goal is to make business succession easier. Another objective is to enable the family of the deceased to sort out inheritance matters and at the same time ensure the uninterrupted operation of the company.
Company succession – a family foundation
On the 6th of February 2023, the President of the Republic of Poland signed the Act of 26th January 2023 on the family foundation. It regulates the organization and functioning of the family foundation. Moreover, it specifies the rights and obligations of the founder and beneficiary.
The idea of a family foundation is based on separating business and family from each other. The family estate becomes the property of the foundation, which is to provide the family with financial means. It also aims to realize the founder’s vision. Thus, the family foundation is a way to achieve a certain purpose. Namely, to plan a business succession in the perspective of many generations.
Only a natural person who has full legal capacity can be the founder of a family foundation. The declaration of establishing a family foundation can be made in the founding act or in the will.
Forming a family foundation requires:
- submission of a declaration on establishing a family foundation in the founding act or in the will,
- establishing the statute,
- making a list of owned properties,
- establishing the family foundation’s organs required by the law or statute
- contributing the founding capital before entry in the register of family foundations in the case of establishing a family foundation with the founding act. Alternatively, contributing the founding capital within two years from the date of obtaining an entry in the register of family foundations in the case of establishing it in the will.
- obtaining an entry in the register of family foundations.
The founder contributes assets to the family foundation to cover the initial fund. Its value is specified in the statute and it amounts at least to 100,000 PLN.
The governing bodies of the family foundation are the management board, the supervisory board, and the assembly of beneficiaries, which meets in specified cases. This is to ensure the influence of a family on the most important matters in the perspective of many years.
The founder has considerable freedom in determining the rules of managing the family foundation and its functioning. He also determines the purpose for which it was established. Most often, it will be to ensure uninterrupted business succession. Another important objective is to provide means of support for family members.
The Act of 26 January 2023 on Family Foundations will enter into force on 22 May 2023.
Company succession – a project of the Polish Agency for Enterprise Development (Polish PARP)
In the face of ever-changing environment, economic crisis or increasing competition, many family businesses are still postponing succession. Even though there are certain solutions that allow it. Legal, financial, and organizational support, offered by European funds, can be helpful. Grants for business succession are available as part of the project of the Polish Agency for Enterprise Development. The aim of the funding is to support advisors who will examine the situation in a company that is planning business succession. They will point out potential opportunities and risks. The project is addressed to family businesses understood as:
- enterprises run on the basis of work performed personally by at least two family members. At least one of them must have a significant influence on the management of the enterprise;
- companies in which family members jointly hold the majority of shares.
A family member is understood as descendant, ascendant, siblings, children of siblings, spouses, partners, persons related by law, adopters and adopted persons.
As part of the project, a minimum own contribution of 10% of the project’s value is necessary.
The entrepreneur can allocate this funding for:
- support from advisors who will diagnose the situation in the company, indicate potential opportunities and threats,
- assistance in designing the succession in legal, financial and organisational terms.
Applications submitted as part of the “Succession in Family Businesses” project are carried out by regional operators. The application deadline is the 30th of September 2023.
A family business is one of the most common forms of doing business. Thanks to family businesses and their activities, dozens of families find stable employment. Despite successes in many fields, family businesses often face problems related to combining business and family relations. This relates also to business succession. Solutions that allow planning the succession process and implementing it at the right time include, among others, appointing a succession manager, establishing a family foundation, or using grants for business succession.
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