“A large number of companies in the Dutch fresh fruit and vegetable sector are family-run. These businesses have been established by past generation(s). In this sector, we see an awareness of the fact that it is a family business and the possibility of an eventual succession. However, in many cases, no optimal use can be made of the tax-facilitated follow-up. This is because these matters are not well planned", says Leroy Smits. He is from the accountants' organization, BDO.
“Being able to make use of the company succession tax services is extremely important for the continuity of the business. When it is not planned well, tax claims in the event of a calamity can reach up to 40% of a company's value. These calamities include events such as death. This type of event can place a business' continuity in jeopardy. When the service is, however, must use of, this tax claim may be limited to only 3,4%”, he explains.
“When we talk about family businesses of any size, we see that in almost all of them, something has always not been arranged properly. This is regarding wills, marital conditions or mutual agreements regarding offer obligations", explains Leroy.
"Based on a calamity check, we assess to see if the tax service can be used optimally. This is careful, precise work. At this stage, we look ahead and see that these matters are adjusted. In this way, the company can continue with the highest possible returns."
"Besides the calamity check, we also, of course, assist in follow-up processes if the owner is still alive," he says. "This could, for example, take the form of donations of a phased transition to the next generation. Here, these tax facilities can also be applied, provided they are correctly formulated ."
In addition to the tax implications, the human side of the story must also be taken into account. This is called the soft side of succession. "We often see that companies are already being transferred while the owner is still alive. This takes the form of a donation or a direct or phased transition. In these cases, one gets to deal with various aspects."
"The question is also sometimes raised as to whether the successor is, indeed, qualified enough to run the business. We discuss this with the family and do assessments. Based on this, a family statute is set up. Herein the agreements are noted. Among other things, the framework within which each person will operate, is also described."
"Here, we guide and advise. The aim is that everyone in the family, including those members that will not take over the business, feel comfortable with the arrangments. Everyone also has to be on the same page", continues Smits.
“It does sometimes happen that, through the interviews and assessments, the limitations of a successor are brought to light. If this occurs, a process in set in motion. Here, these limitations are addressed through training. If things do not improve, advice may be given that the son or daughter is not sufficiently suited to be a successor", Leroy goes on to say.
This tax adviser can say, from experience, that businesses leave it too late before making arrangements for succession. "I, myself, also come from a farming family. When the company was taken over by my uncle, my grandfather came around every day."
"The older generation's experience and know-how must not be lost. Having said this, there must also be room for innovation and the renewed vision of the younger generation. It is understandable that it is difficult to just let go of a business. This must, however, not stand in the way of the new generation."
“It is nice to see that companies in the fresh fruit and vegetable sector plan ahead. They make plans for the business' future. You do, however, notice that this sector is predominantly pragmatic. The people in this sector are also not overly fond of bureaucratic red tape. The pragmatism is the beauty of this sector. Clients must, however, understand the consequences of any kind of calamity. Although BDO offers support in the process, we do not force the companies to initiate transitions. Clients must indicate this themselves. However, we do the calamity check for everyone. We also make everyone aware of our tax services. We aim to ensure that company succession runs as smoothly as possible", concludes Leroy.
Do you also have a successor in mind? BDO is organizing NextGen Masterclasses throughout the Netherlands. This is specifically aimed at the 'Nextgen' - the next generation of potential successors within family businesses. Click here to register and for more information.
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