B U S I N E S S
A shareholders’ agreement may
contain key aspects relating to the
succession planning ability on a
business’s shareholding
Succession Planning in
the Alcohol Industry
Have an established plan in place to save headaches later
By Adrian Joseph
Sooner or later the time will come
when successful business operators
feel they want to move on to other
things, think of retiring from the business
or they may suddenly pass away. Those
operating with others in a partnership or
as shareholders of a corporation may find
one or more of their business partners
encounter this first. The aim of this article
is to highlight a few of the tools that exist
to help deal with succession planning in a
business context.
Estate freeze of a family business
An estate freeze is a term commonly given
to a transaction where one locks in or
freezes the value of appreciating assets
such as the shares of a business that have
further growth potential. When one is
contemplating stepping down and want-ing
the next generation to take over, and
gain the benefit of any share price appreci-ation
under their watch, an estate freeze is
performed. This is typically implemented
by exchanging property likely to grow in
value (i.e. the common shares of their busi-ness
which they have owned up to now)
for another type of property that has no
growth potential (preference shares whose
values are fixed to the current market
value of the business). The next generation
would subscribe for a new class of com-mon
shares where the future growth of the
business would accrue.
There are many variants of estate
freezes, from performing an internal share
exchange, setting up a separate holding
company, creating a family trust, a stock
dividend freeze or a combination of these
to suit the situation.
In addition to being an enabler for
family members to take over the business,
an estate freeze has further benefits such as:
•• Tax minimization and deferral:
In Canada people are taxed on capi-tal
gains on the latter of the business
owner or their spouse’s death. An estate
freeze will peg one’s tax liability to the
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FALL 2019 § POURED CANADA § 45