Perspectives from ISB

A common question for family business succession, and particularly for primary production family business, is when control of the business should be passed to the next generation, without risking the valuable assets of the business if something goes wrong.

Unfortunately, it is far too common to see the first generation wishing to retain control of large assets due to a perceived risk of what may happen to those assets if passed to the next generation.

With appropriate advice and planning, this risk can be minimised, and ultimately the first generation needs to be aware of the potential risk to the family and the business as a consequence of not appropriately transitioning an intergenerational business during lifetime.

Conversely, it is very important to ensure that the next generation is in fact invested in the business, fully trained on all aspects of the business (particularly the financial aspects of the business) before a full transition of the business occurs.

Frequently we see situations where the business itself has been fully transitioned to the next generation, with the parents retaining only ownership of the land without any other involvement in the business conducted on the land, and this can become extremely costly when it is necessary to transfer the land in due course.

There is no easy answer in respect of maintaining control as to some extent the timing of passing control will depend upon the many factors including the business acumen of the next generation.

Having said that, if parents are no longer involved in the business and the capital required to fully fund the parents in retirement is able to be secured for parents, then passing full control of the business needs to be properly considered, along with passing of the assets that are needed to conduct the business, so that the next generation is secure with a viable business moving forward for themselves and their family.

If this is not able to be achieved, a carefully structured agreement between family members may need to be considered to limit the exposure of the business to any potential family dispute in respect of business assets.

Source: Wilson, Kylie., 23 April 2017,