What entrepreneurs need to bear in mind when inheriting companies and company shares has already been discussed in this articlel is dealt with. The challenges and problems faced by the next generation of business owners with regard to claims to compulsory portions are particularly serious. The assertion of compulsory portion claims can have consequences that threaten the existence of the company. There are just as many ways to organise this as there are problems. In addition to the instruments of inheritance law, there are also effective corporate law measures to mitigate the effects of the compulsory portion.
What problems are there with regard to the compulsory portion in company succession?
The question of the actual value of the company to be used to calculate the compulsory portion is particularly complex. In contrast to listed stock corporations, where the value is easy to determine, this is more complicated for small and medium-sized companies. Those entitled to a compulsory portion are entitled to a valuation and can request an expert's report from the heir. This can lead to discussions about the appropriate method for determining the value of the compulsory portion.
How can you avoid problems with compulsory portions?
1. waiver of compulsory portion
In the context of company succession, the most effective structuring instrument is undoubtedly the waiver of the compulsory portion. The waiver of the compulsory portion gives the entrepreneur unrestricted testamentary freedom.
Such a waiver of a compulsory portion requires timely planning and presupposes that the relative concerned is (still) prepared to conduct negotiations at the family table. Of course, a waiver of a compulsory portion is not possible without compensation. The parties involved must agree on compensation. This could, for example, be the immediate payment of a financial settlement or the allocation of the entrepreneur's personal assets in the will.
Personal sensitivities and interpersonal relationships in the family as well as the composition of the testator's assets and liquidity play a decisive role in waiving a compulsory portion. It is therefore essential to carefully examine the individual interests as well as the economic needs and possibilities when drawing up an agreement on a waiver of a compulsory portion.
2. donations
If it is not possible to waive the compulsory portion, an entrepreneur can try to circumvent the right to a compulsory portion of the next of kin by making gifts during his or her lifetime. To this end, shares in the company are often transferred to the chosen successor ahead of time. However, there are several aspects to consider here.
On the one hand, it should be noted that in the case of gifts to a third party by the testator, the beneficiary of the compulsory portion can demand the amount by which the compulsory portion is increased if the gifted object, in this case the company share, is added to the estate as a supplement to the compulsory portion. However, in accordance with Section 2325 (3) BGB, the gift is taken into account in full within the first year prior to the inheritance and thereafter by one tenth less in each case. It is particularly important to emphasise that the gift is not taken into account if ten years have elapsed since the asset was given. It is therefore strongly recommended that entrepreneurs take care of their estate planning at an early stage and realise planned gifts as soon as possible.
A common and far-reaching mistake when planning the reduction of the compulsory portion is to stipulate a usufruct. In fact, the 10-year period mentioned above does not even begin to run if the donor does not suffer any economic loss as a result. A reservation of usufruct over a property or a share in a company therefore generally constitutes an obstacle to the reduction of the compulsory portion.
It is also important to take legal precautions to ensure that the entrepreneur is not restricted in his freedom of action by the new shareholders and retains control. For this reason, clawback rights should be defined in the gift agreement and the partnership agreement should be adapted in favour of the company to ensure this.
An early gift can also bring tax advantages. The personal allowance for inheritance and gift tax is available every ten years and amounts to 400,000 euros for children, for example.
3. restricted special-purpose assets without settlement
Company law also offers a special opportunity to reduce compulsory portions in the event of company succession. Under certain circumstances, the early transfer of shares in a company may not constitute a gift tax-relevant donation, even if the new shareholder does not make a capital contribution. This is mainly due to the personal liability that is assumed and the other obligations under company law, such as the provision of labour. This also applies if the entitlement to compensation in the event of death has been set at EUR 0 in the articles of association.
The legal situation is different for companies whose aim is to manage private assets within the family, where there are no relevant liability risks and there is no intention for the company to continue the business in the event of death. This is mainly due to the personal liability that is assumed and the other obligations under company law, such as the provision of labour. This also applies if the entitlement to compensation in the event of death has been set at EUR 0 in the articles of association.
It therefore depends on the specific structure, purpose and partnership agreement of the partnership to determine the extent to which measures to reduce the compulsory portion are possible under company law.