Week 8

Question 1

Succession report (Step 3)

Answer 1

Based on the interviews, a report, or essentially the
recommended succession strategy is developed

This report usually includes 4 main sections:

Part 1: Current situation as we understand it

Part 2: Draft set of guiding principles & their application (Chapter
5)

Part 3: Draft set of family business rules (Chapter 6)

Part 4: Listing of shareholder agreement issues that need to be considered (Chapter 8)

Question 2

Family business rules

Answer 2

u Objective: To provide a set of rules to guide family
members in their personal, business and family
relationships.

Methodology: Usually the rules are developed by the
Family Business Practitioner and then given to the owners
and active family members for their review, feedback,
and any required changes.

Once agreed to by active family members, these rules are shared
with the broader family

They can then share their concerns and feedback

Question 3

Family business rules

Answer 3

Wills, holding companies,
family trusts
• Need to be in sync with the succession plan and can be
party to the shareholders’ agreement

Leaves of absence and
sabbaticals
• What are the criteria to qualify for a leave or
sabbatical?
• Are they paid or unpaid? How long?

Parental leave
• How long do you get? Does this time count towards time
in the business (for management and ownership
criteria)

• What are the terms and conditions? Who qualifies?
• How is it decided?

Business loans, purchasing
goods/services from family
members and use of corporate assets for personal benefit
• What are the terms and conditions? Who qualifies?
• How is it decided?
Business loans, purchasing
goods/services from family
members and use of corporate
assets for personal benefit

Question 4

Family business rules

Answer 4

Philanthropy
What do we do (as the family business) with respect to charity?
Do we have a designated charity?

Public relations
Who is in charge of speaking with media?
What can we talk about it and what can’t we?

Confidentiality
What can we share?

Changes to the code of conduct
How is this done? Who needs to agree?

Conflict of interest
Who decides what is considered a conflict?
Do we need approval or are we not allowed to have a conflict?

Question 5

Step 4 – Overview of the succession report

Answer 5

Starts with the owners (individually)

Reviewed with the active family members (individually)

Then the report is updated to reflect any feedback
received

Question 6

Step 5 - Finalizing the succession report

Answer 6

Starts with the owners’ approval of any changes made in Step 4

Once approved, it is sent to all active family members for
review and approval

A family business meeting (with all owners and active
family members) is held to confirm their collective
endorsement and discuss next steps

The succession report is then sent to all other members of the broader family (all those who participated in individual interviews) as well as to the required advisors (lawyer, accountant, financial planner, insurance broker,
etc.)

Now that the succession report is finalized, the technical component kicks-in

Letter of intent – way to safeguard the succession plan

Ensures that if something happens to the owner(s) between Step 5 and the technical component being complete, which can take 6+
months that the outlined and agreed to plan will be implemented.

Should be signed by all owners – some families have their entire family sign it.

Question 7

Step 6 – Succession Binder

Answer 7

Integrates the family and technical component into a
comprehensive binder or USB with all relevant
documentation

Becomes the families “succession bible” – everything they
need to know is in there

Review and finalize SHA

All active family members should have one and all non-
active family members should know of their existence

The binder would have: guiding principles, family business rules, wills, shareholder’s agreement, holding companies, trusts, marriage contracts, etc.

More details to be covered in Chapter 8