If you are a 2nd or 3rd generation business owner or if you’re a 1st generation business owner looking to hand over your legacy to the 2nd or 3rd generation of your family, then this articles will be helpful to you. Some necessary steps need to be taken, some risks must be considered and necessary measures put into place to ensure a smooth transition, continuous growth and stability in your businesses.
Here are 2 areas to look into:
Business Structure and Ownership:
Review the corporate structure of your business entity. Many family businesses have humble beginnings and the most basic corporate structures in place. As the business grows and transcends generations, a more sophisticated corporate structure may be necessary to ensure that the business is aligned with current goals.
It is important to have the necessary transfer of ownership documentation and shareholder agreements to ensure all legal requirements for the transfer of the business are met.
Trust structures are popular with family businesses as they facilitate the smooth transfer of business ownership across generations and allows for tailored management of beneficiaries, especially in cases where some family members are not actively involved in the business.
Integrating Environmental, Social, and Governance (ESG) Principles:
Implementing ESG compliant practices and policies in operations, supply chain management, and product design to minimize environmental impact and investing in renewable energy sources and technologies to reduce carbon footprint, is the way to go.
Budget 2024 sets out a comprehensive ESG roadmap for Malaysia’s economic transformation, for example, tax deductions for ESG expenditures particularly for listed companies, and Micro Small and Medium Enterprises. Companies undertaking qualifying green activities will be eligible for tax incentives via Green Investment Tax Allowance and Green Income Tax Exemptions.
Implementing policies to ensure diversity and independent board representation to improve decision-making and governance.
Women returning to work after a career break of at least two (2) years may be eligible for income tax exemption on employment income received from 2025 to 2028 under Budget 2024.
By integrating ESG principles, next-generation businesses can improve operational efficiency and innovation capabilities but also build a sustainable, ethical, and socially responsible business that on the long run will guarantee profitability.