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  • 54% of Spanish companies will grow this year with M&A operations

    The second half of 2023 looks set to be very active in the M&A sector. According to the report «Perspectivas M&A en España 2023» conducted by KPMG in collaboration with the employers’ association CEOE, 54% of executives expect to boost the growth of their companies through M&A transactions in the coming months.

    After surveying 1,100 Spanish entrepreneurs, the study concludes that one in four executives expect to accelerate the growth of their business with an acquisition or alliance in 2023. This is a significant increase from 2022, when only 11% did so.

    In recent times we are already seeing large deals by international private equity funds. Some outstanding examples are the recent purchase of Amara NZero by the British fund Cinven, valued at 700 million euros, or the acquisition of Windar Renovables by Bridgepoint for 650 million euros. In the coming months, it is expected that many large companies will launch secondary businesses on the market, choosing to focus on their core business and resorting to this type of divestment to obtain liquidity.

    Objectives: diversify, generate synergies, creat new lines of business…

    In the current environment, joint ventures, alliances and acquisitions are seen by many companies as a good way to cope with uncertainties. The reasons for undertaking M&A according to business people are mainly the following:

    • Find a good market opportunity (50%).
    • Achieving geographical diversification (36%). In these cases, the preferred formula is the joint venture.
    • Enter new lines of business (35%).
    • Consolidate market share (34%).
    • Generate cost synergies (31%).
    • Increase customer base (29%).
    • Overcome the limited options currently offered by organic growth (26%).

    In short, alliances or joint ventures reduce risks and facilitate entry into new businesses, sharing synergies and also facilitating access to debt.

    What are the main difficulties in undertaking M&A transactions

    According to the entrepreneurs surveyed, these are the main difficulties they face when undertaking an M&A transaction:

    • Economic uncertainty (72%).
    • Finding good investment opportunities (41%).
    • High asset prices (36%).
    • Complexity of the transaction (30%).
    • Difficulty in obtaining financing (27%).

    Securing funding, one of the main challenges

    This last challenge, that of financing, deserves a special comment. After years of very low rates, it is now much more expensive to finance. For this reason, transactions where the strategic side outweighs the financial side are now much more likely to be completed successfully. However, in the second half of the year, divestments to raise liquidity are expected to increase cash and reduce debt.

    According to the KPMG and CEOE study, the main sources of financing to support mergers and acquisitions are domestic banking (47%), private equity (17%), foreign banking (16%), capital markets (12%) and alternative sources of financing (8%).

    As we can see, the responses recorded suggest that banks in Spain are still willing to finance transactions. However, it is worth highlighting the growing role played by private equity funds, which now account for almost 25% of M&A investment in Spain. We are seeing this in large deals such as Pronovias and Abengoa, and the forecast is for them to play an increasingly important role in the market.

  • How to prepare your company for the new mandatory electronic invoices

    There are still many doubts about the forthcoming obligation for companies to use electronic invoicing. In this article we explain all the details, deadlines and penalties for non-compliance with this new regulation.

    What is an electronic invoice

    Just like the traditional invoice, the electronic invoice is a commercial document that records a sale or purchase of goods or services and the corresponding taxes applied, such as VAT or personal income tax. The only difference is that it is issued electronically and in digital format.

    The mandatory data that the electronic invoice must include are identical to those of the traditional invoice. That is to say: sequential numbering, date of issue, details identifying the issuer and recipient, concept, taxable base, etc.

    For the rest, we are still awaiting the approval of an official regulation on e-invoicing and possible additional conditions that this may include. For example, it is likely that the identification of invoices with a QR code will also be mandatory.

    Progressive regulation 

    The first time electronic invoicing was regulated in Spain was in Law 56/2007, on Measures to Promote the Information Society, which promoted the use of this type of invoice in public administrations.

    Five years later, Law 25/2013, of 27 December, extended mandatory electronic invoicing to all corporate transactions with the public sector that do not exceed 5,000 euros.

    The most recent regulation is the Business Creation and Growth Act of 2022, which extends the obligation to use electronic invoicing to the entire private sector. Thus, Article 12 specifies that all companies «shall issue and send electronic invoices in their commercial relations with other companies». It should be noted here that invoices addressed to consumers or end users are excluded from this obligation.

    Main objectives of e-invoicing implementation

    • Fighting late payment, because electronic invoicing makes it easier to monitor payment deadlines.
    • Reduce costs in commercial transactions.
    • Driving digital transformation in companies.
    • Encourage the use of electronic means for business transfers.

    What are the deadlines for companies to use electronic invoicing

    Companies with an annual turnover of more than €8 million have until September 2023 to fully adapt to e-invoicing. In the case of companies with a lower annual turnover, the deadlines are considerably longer, until September 2025.

    Penalties for companies that fail to adapt to e-invoicing may face fines of up to 10,000 euros.

    Technology requirements

    Law 11/2021 on measures to prevent and combat tax fraud establishes «the obligation for producers, marketers and users to ensure that the computer or electronic systems and programmes that support the accounting, invoicing or management processes of those who carry out economic activities guarantee the integrity, conservation, accessibility, legibility, traceability and unalterability of the records, without interpolations, omissions or alterations that are not duly noted in the systems themselves.

    In short, these are a series of technical requirements that management, accounting and invoicing software must meet. We therefore recommend preparing now with the implementation of a solvent software that offers guarantees and complies with current and future regulations.

  • How bankruptcy reform affects entrepreneurs married in community of property regime

    The Repealing Provision of the latest Insolvency Reform has rendered Articles 6 to 12 of the Commercial Code null and void. And although this change has gone rather unnoticed, the truth is that it may have very important consequences for entrepreneurs married in community of property regime, since it directly affects the employer’s liability regime.

    In most of Spain the default matrimonial property regime is that of community of property. So this development may affect many entrepreneurs in the event that their companies go into insolvency proceedings.

    Until now, liability has been limited to the common assets obtained from the business activity

    Until now, Articles 6-12 of the Commercial Code, which have been repealed by the Insolvency Reform, provided that in the case of a married person carrying on a commercial activity, he or she should be liable both with his or her own assets and those of the spouse. However, this required the consent of both spouses.

    When was such consent understood to exist? Articles 7 and 8 of the Commercial Code established some situations in which tacit consent was understood to exist. For example, when the trade was exercised with the knowledge and without the express opposition of the spouse who should provide it. Or when the entrepreneur spouse was already engaged in trade at the time of the marriage and continued to do so thereafter without any opposition from the other spouse.

    All common assets are now likely to be subject to the results of the company’s activity

    Until a few months ago it was possible to limit the liability of the community of property only to the common assets obtained from the entrepreneurial activity. However, with the passing of the Insolvency Reform, from 26 September 2022 all joint assets will be subject to the results of the entrepreneur spouse’s activity. And the other party to the marriage cannot express any opposition.

    With the latest Bankruptcy Reform, Article 1365 (2) has been added to the Civil Code. This provides that «community property shall be directly liable to the creditor for debts incurred by a spouse in the exercise of a profession, art or craft or in the ordinary administration of his/her own property».

    The  Civil Code also stipulates that the community of property must meet the expenses and debts arising from the business

    On the other hand, Article 1344 of the Civil Code makes the profits or gains obtained by either of them common to both partners. Following the same reasoning, Article 1362(4) provides that the community of property must meet the expenses arising from the regular operation of the business or the performance of the profession, art or trade of each spouse.

    How to protect the assets of the community of property if the company gets into difficulties

    There is a way to prevent the community of property from being held liable for the payment of debts arising from the economic activity exercised by one of the spouses. The easiest way is to change the matrimonial property regime to one of separation of property. In this way, unless the spouses expressly agree, the assets of each spouse become separate property.

    In order to change from community of property to separation of property, it is sufficient to sign a notarial deed called a marriage contract before a notary.

  • The Board of Directors in the family business

    Although it sometimes seems to be a governing body reserved for large listed companies, the Board of Directors is also key in family businesses, especially when they start to grow.

    Because its functions include such important functions as directing and supervising the company’s operations, establishing its medium- and long-term strategy and also monitoring and periodically improving it, controlling risks and ensuring the availability of financial resources for both the company and the family.

    When is it advisable to set up the Board of Directors of a family business?

    As family businesses grow, their management becomes more complicated and people from outside the business family join the company in positions of responsibility. This is the ideal time to set up a board of directors. For example, to prevent non-managing family members from feeling that their interests are being subordinated to those of the managing members.

    The basic objective of the family business is to ensure its survival over generations. And for this it needs corporate governance that takes care of both the business and family relationships.

    Who should be on the Board of Directors of the family business?

    There is no single way to form the Board of Directors of a family business, which must represent the interests of the shareholders, but also understand the vision, mission and values of the family.

    It depends very much on the point in the life cycle of the family business. However, it is most common for members of the business family to be integrated into it, if possible belonging to several different generations. In this way, the company benefits from the contribution of different points of view and gradually incorporates the new generations into the management of the business.

    In the case of family businesses that integrate different lineages, it is advisable for all of them to have a presence in order to balance power and make them all feel part of the common project.

    It is also advisable to include external directors on the Board of Directors who bring their experience in different companies and provide a more neutral and detached view of all the conditioning factors involved in mixing family and business. To guarantee their independence, it is important that they are free to give their opinion without jeopardising their position.

    Functions of the Board of Directors

    • Define the values of the company, which should remain aligned with the family’s culture, values, traditions and history.
    • To look after the interests of all owners, without losing sight of the company.
    • Striking a balance between the obligations of the company, the needs of the shareholders and the expectations of the family.
    • Ensure compliance with legal requirements.
    • Hire, evaluate and dismiss if necessary the general manager.
    • Guiding the CEO and the management team in the long term, e.g. by helping them to identify opportunities, as the Board of Directors has a broader view of the overall situation of the company.
    • Establish the company’s medium and long-term strategy.

    Delegating to secure the company’s future

    Setting up a Board of Directors in a family business is a complicated decision because it involves delegating and bringing in people from outside the family. But it is an essential decision for the future of the business as it grows.

    For all these reasons, the figure of the Board of Directors must be tailored to each company, defining very well the medium and long-term strategy of the company and risk control. At Confianz we are specialists in advising family businesses, and we are ready to accompany you throughout this process.

     

  • Strategic reasons for a takeover or reverse merger

    To talk about reverse mergers, we have to start at the beginning. There are two ways in which two companies can be merged: takeover and merger:

    • In a takeover process one of the two companies (the absorbed company) disappears and is fully integrated into the other (the absorbing company).
    • In a merger process two companies merge to create a new company. As a result, the two initial companies cease to exist as independent companies.

    The big fish doesn’t always eat the little fish

    In corporate practice, as in the natural world, it is most common for the big fish to metaphorically eat the little fish. Thus, in both cases it is usually the company with the larger assets that ends up controlling the resulting company. The company with smaller assets does not necessarily lose its legal identity, but becomes subordinate. However, there are exceptions.

    What is a takover or reverse merger?

    A reverse merger is a merger of two companies in which the smaller company takes control of the new company. It is rare, but sometimes it is the larger company that disappears or moves to a subsidiary position.

    Such reverse mergers are neutral in accounting terms, irrespective of who acquires whom and irrespective of the name, registered office or majority shareholding of the resulting company. Nor can they have any tax implications. It would be tax evasion if as a result of a reverse merger the resulting company were to pay less tax than if it had carried out a conventional merger.

    Strategic reasons for opting for a reverse takeover

    In practice, there are many reasons why takeovers and acquisitions are sometimes carried out in a manner contrary to what is usually done:

    • Legality and taxation. In cases where the smaller company has its registered office in a location where there is a legal or fiscal framework that is more beneficial to the activity of the company resulting from the operation.
    • Geography. When the smaller company is closer to the centres of power, to customers or suppliers, to logistical centres…
    • Competitiveness. In sectors undergoing major change, it may be that the smaller company nevertheless has more commercial potential in the medium to long term.
    • Reputation. Sometimes the company with less equity has a better brand image and offers more potential from a marketing point of view.

    Are transactions between subsidiaries and parents reverse mergers or improper mergers?

    There is much confusion as to the true nature of reverse mergers and how they differ from so-called improper mergers. For example, stricto sensu, we cannot speak of a reverse merger when it involves operations in which a subsidiary takes control of its parent group. A practical example of this would be the recent merger of Ferrovial’s parent company with its subsidiary Ferrovial International SE.

    These types of vertical operations fit better under the definition of improper mergers. This is also a problematic denomination, because although the law allows for such operations, they are called «improper» because they are not really mergers.

    It should be borne in mind that parent and subsidiary are already from the outset companies of the same group and share a common shareholding. Thus, when a subsidiary takes control of the parent company, it is more an internal reorganisation than a merger or takeover per se.

    At Confianz we are specialists in M&A. Contact us and we will advise you to make your transaction a success.

  • Brussels sends a first warning to Spain for its delay in transposing the mobility directive

    On 27 March, the European Commission sent letters of formal notice to several EU member states for their delays in transposing various directives. Spain received three of these letters. One of them, the one we are going to deal with in this article, concerns the 2019 mobility directive on cross-border transformations, mergers and divisions. This is the first step in a process that could end with the European Commission issuing proceedings and fining Spain for its delay.

    Objectives of the 2019 mobility directive

    The 2019 mobility directive on cross-border transformations, mergers and divisions (Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019) amends an earlier one from 2017. In the context of an increasing internationalisation of economic operators, its objectives are:

    • Streamlining and making more transparent cross-border business mergers within Europe that give rise to new transnational European companies.
    • Provide more information and assurances to employees and shareholders.
    • To facilitate and simplify legal work when analysing the structural modification operations of commercial companies.
    • Promote mobility within the EU in order to improve the functioning of the internal market.

    Whereas Directive (EU) 2017/1132 contained only rules on domestic divisions of public limited liability companies, the new Directive (EU) 2019/2121 extends cross-border regulation also to partial and complete transformations and divisions involving the formation of new companies.

    In Spain, the bill still has to pass through Congress and the Senate

    The deadline for transposing this directive into Spanish law expired on 31 January. But Spain is running late. A draft bill to reform the law on structural modifications of commercial companies was approved on 14 February, but it still has to go through the entire parliamentary process in Congress and the Senate. Realistically, it is highly unlikely to achieve this in an election year such as 2023. In July and August there will be no sessions and the Cortes will be dissolved in October at the latest.

    Following the mobility directive that it transposes, the draft bill seeks to establish a harmonised legal framework for cross-border company mergers in Europe. Its purpose is to regulate structural modifications, both internal and cross-border, of commercial companies consisting of transformation, merger, demerger and global transfer of assets and liabilities.

    Widespread dealy in EU member states 

    Spain was not the only country to be notified for the delay in transposing this directive. Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, France, Greece, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia and Slovenia have also received this first warning.

    After this first letter of formal notice, if Spain continues to delay in transposing the mobility directive, the European Commission may initiate Community proceedings. In such cases, the country concerned usually has two months from this point to communicate its position. If Brussels considers that the directive has not been transposed into national law, then the case is initiated.

    The state concerned then has a further two months to report on the transposition measures. If it persists in non-compliance, the Commission reserves the right to refer the matter to the Court of Justice of the European Union to impose sanctions. In Spain’s case, this would not be the first time it has gone to court over a delay in transposing a European directive. For example, last year we already saw it for the delay in the transposition of the audiovisual directive.

  • Anti-embarrassment or anti-shaming clause in M&A transactions

    In recent years, the inclusion of a so-called anti-shame or anti-embarrassment clause has become more and more common in company purchase and sale transactions. This allows the selling party to secure financial compensation in the event that the buyer resells the assets at a significantly higher price within a relatively short period of time.

    The anti-embarrassment clause is often found in divestment contracts of private equity companies. The aim is literally to prevent the seller from being embarrassed by the agreed price. Because calculating the price in M&A can be very complicated and thus minimises the risks of both financial and reputational damage.

    The example of Telefónica

    When Telefónica sold its mobile tower division in Europe and Latin America to American Tower for €7.7 billion it included an anti-shaming clause in the contract. This ensured that it would receive financial compensation in the event that American Tower sold all or part of the assets, merged with another company, agreed to share the infrastructure with a third party…

    Why include an anti-embarrassment clause in the sales contract?

    Why include an anti-embarrassment clause in the sales contract?

    Also known as a best-fortune clause, this is a mechanism that gives the seller peace of mind that the agreed price is not far below the market. Because sometimes it is natural to have doubts about this and even suspect that the buyer has already agreed to a subsequent resale at a much higher price.

    The anti-embarrassment clause is in fact an agreement in the contract according to which the sale price will be adjusted upwards if the buyer resells the shares at a higher price. In addition to sparing the seller the embarrassment of having sold below the market price, this clause serves to make the seller a participant in the capital gain made by the buyer.

    What an anti-shame clause should include

    There are four key issues to specify in any anti-shaming or anti-embarrassment clause:

    • The period of time during which the seller is entitled to upward price adjustment. This is usually not too long and is limited to a period of between one and five years.
    • The percentage increase in price that will give rise to the right to upward adjustment. For example, if the shares are resold within the period provided for in the first bullet point at a price 15% higher than the purchase price.
    • The number of units whose resale will trigger the realignment. It may be expressed as a specific number or as a percentage of the total.
    • The price adjustment system to be applied. One possibility is that the original selling party is entitled as compensation to a percentage of the price increase obtained from the resale. This is usually around 50%. It is also necessary to foresee the way in which this would be effective.
    • Some mechanism to prevent possible breaches of the clause by the buyer. For example, specific penalties in the event of concealing the sale, simulating a lower price than the real one, or even agreeing a sale to be executed after the end of the period of application of the anti-embarrassment clause. Another possibility is to control or prevent the distribution of dividends or reserves during the agreed period.

    If your company is going to negotiate the M&A transaction, Confianz can help you negotiate an anti-shaming clause to ensure you get the best price for the sale.

  • Blow to loss relief: tax groups will only be able to take advantage of 50% of negative tax bases

    In recent months, the Executive has launched a package of measures aimed at obtaining a greater tax contribution from large estates and companies. Among them we have already talked about the Solidarity Tax on Large Fortunes. Today we will talk about another far-reaching measure. This is the temporary reform of the tax consolidation regime that limits the offsetting of losses in groups of companies taxed under the tax consolidation regime.

    What is the tax consolidation regime?

    Introduced in 1995, the tax consolidation regime is a special tax regime based on the tax group as the sole taxpayer or taxpayer of the tax, rather than the individual entities that make up the group.

    With it, corporate tax is calculated on the basis of the consolidated taxable income of the tax group. That is: the sum of the individual tax bases of all the entities that make up the group. Most commonly, with this calculation, the tax losses that may be recorded by some companies in the tax group during the year can be offset against the taxable profits generated by the rest of the companies in the group.

    This advantage disappears with the new temporary rule which, according to the Ministry of Finance and Public Administration, could affect 3,609 companies this year.

    What changes with the new temporary reform of the tax consolidation regime?

    The use of loss compensation is reduced by half

    The way in which the taxable base of tax groups is calculated changes. In 2023 it will be determined by the sum of 100% of the positive tax bases and, this is the novelty, only 50% of the negative tax bases.

    50% of the negative bases may be integrated in the following 10 financial years

    Tax losses not included in the tax base in 2023 can be included in equal parts in the following ten tax periods. In other words, their full recovery is delayed to the period between 2024 and 2033, a period of 10 years.

    Moreover, the recovery of the amount not deducted must be carried out by the group itself. In this way, companies that could leave the group in the coming years are prevented from using their tax loss carryforwards that have not been used in 2023. This breaks with the general criterion applied until now. Prior to this reform, entities leaving a group were entitled to take any unused tax credits they had generated.

    In cases of termination of the group, the amount pending recovery may be included in the consolidated tax base of the last tax period in which the group is taxed under the consolidated tax regime.

    Consequences of the new tax consolidation regime

    In practice, this reform will mean a tax increase for groups generating tax losses in 2023. Among the most affected will be many venture capital investment structures. Because in this sector the creation of holding companies is common, in which the acquisition debt associated with leveraged buyout operations is placed.

    On the other hand, the new system of linear recovery over ten years of amounts not deducted could favour certain tax groups wishing to accelerate their loss recovery schedule.

    How to act now

    It is therefore time to analyse the impact that the reform will have on our tax groups and to consider what possibilities we have to mitigate the possible negative effects. These are two of the strategies we could put in place:

    • Undertake corporate restructuring operations aimed at a greater distribution of profits among the different companies of the tax group.
    • Allocate the acquisition debt in holding companies to the operating subsidiaries generating positive tax bases.

    At Confianz we can help you plan the best way to deal with the temporary reform of the tax consolidation regime affecting loss relief in 2023.

  • These are the new paid work-life balance leave entitlements that workers will be able to apply for

    The new Family Law brings important novelties in the field of labour law, as it establishes three new types of paid leave aimed at facilitating the reconciliation of family and work.

    The three work permits provided for in the Families Act

    The three work permits provided for in the Families Act

    Until now, the Workers’ Statute only allowed two days of absence per year for very serious causes such as death, a complicated illness or an accident of relatives up to the second degree (grandparents, grandchildren or siblings).

    The text created by the Ministry of Social Rights together with the departments of Finance and Justice transposes the European directive on work-life balance and provides for the following work permits:

    Five paid days

    The new law establishes that any worker may be absent from work for up to five days a year to care for a family member up to the second degree or for a cohabitant, whether related or not. This leave is paid and has the following conditions:

    • The worker must give prior notice.
    • The worker must justify the reasons for the leave, which include: serious accident or illness, hospitalisation or surgery without hospitalisation requiring home rest.
    • The sick person’s relationship with the worker may be:
      • Spouse
      • Domestic partnership
      • Relative up to the second degree of consanguinity or affinity
      • Any other person other than the above who lives with the worker in the same household and requires his or her care.

    Four paid days

    In this case, it is a leave of up to four paid days per year for reasons of force majeure which the worker may take «when necessary for urgent and unforeseeable family reasons, in the event of illness or accident, which make his immediate presence indispensable».

    The reason for the absence from work must be provided to the employer by the employee. This absence from work is intended, for example, to deal with the typical situation of a child who has to be picked up from school because he or she is ill. It can therefore be taken partially by the hour, as long as the sum does not exceed four working days.

    In total, in addition to the five days’ paid leave seen above, the new law allows workers to take up to nine paid days off per year to care for children, partners, relatives or cohabitants.

    Eight weeks parental leave

    Finally, the regulation provides for parental leave of eight weeks per year until the child reaches the age of 8. This leave may be taken continuously or discontinuously, but for full weeks. As in the previous case, here the leave may also be part-time or full-time.

    Unlike the previous ones, this is an unpaid leave designed, for example, to reconcile school holidays or during the period of progressive incorporation of the child into the nursery. The employee must specify the start and end date of the leave 15 days in advance to the company. In this case, it is an individual right of the parents, adoptive or foster parents, and cannot be transferred to the other parent.

    The implementation of this leave will be gradual. If the law eventually comes into force in 2023, workers will be able to take six weeks of parental leave this year. In 2024, the full eight weeks of parental leave per year will be in place.

    When will the new work-life balance leave come into force?

    When will the new work-life balance leave come into force?

    These three new discharges will not come into force until the Family Law passes through its final parliamentary procedure and is published in the Official State Gazette, something that may still be delayed for months.

  • The 4 most common challenges facing family businesses

    The operation of family businesses involves a mixture of business and family, business decisions and more personal emotions. For this reason, they face particular challenges, different from those of other companies.

    Challenges specific to family businesses

    These are the four main challenges for companies where a family owns the business and has both management and executive functions.

    1. Succession planning 

    One of the main advantages of the family business is that it can maintain and increase its value within the family over the long term, over generations.

    If all goes well, the successive generations have different roles in the company’s development: the first is creative, the second institutionalising and the third expansive. But achieving this evolution of constant growth is not easy. Some studies put the percentage of family businesses that do not make it beyond the third generation at 80%.

    Ideally, it is the founder of the family business himself who starts planning the succession, progressively delegating his functions in order to avoid excessive dependence on him. The process of generational handover at the top of the organisation needs time, training and know-how. This transition should last at least ten years, allowing sufficient time for the preparation of the new leader and the gradual retirement of the founder.

    2. Choosing the successor CEO

    The choice of the successor CEO in the family business is a key decision for the survival of the company that cannot be based on sentimental reasons. There are still cases in which a son or nephew takes over the reins of the company whose only accreditation is that they are a member of the family. But in this case it is not always preferable to keep the business at home. It is often more desirable to choose an external manager with extensive experience in the sector, even if the ownership remains in the hands of the entrepreneurial family.

    In the same way, having a trusted external advisor can provide an objective and unbiased view that looks after the interests of the organisation and avoids conflicts within the family.

    It is important to avoid the company turning into a recruitment agency where family members take up positions for which they are not qualified or where even tailor-made jobs are created with a specific person in mind.

    3. Allocate fair wages to family memebers

    Many family businesses make the mistake of assigning salaries and benefits to family members based more on their needs than on their role and level of responsibility within the company. And this inequity can go in two directions:

    • The altruistic family employee whose work brings value to the company far beyond his or her remuneration.
    • The family employee who seeks a large salary just because he/she is a member of the family.

    Both irregularities in the salary scale can lead to problems in the short and long term. Family members working in the family business should be remunerated in full accordance with the internal wage band and the reality of the labour market.

    4. The challenges of separating family and business

    Ultimately, mixing work and personal life is one of the main sources of conflict in the family business. It is a difficult separation to make, but conversations about work at family events should be avoided at all costs.