FEW BUSINESS OWNERS like to think about the time they will no longer be at the helm of their companies. After putting in years of blood, sweat and tears to ensure a successful enterprise, the idea of planning an exit strategy can seem unimaginable.
For family-run companies in Hong Kong, the axiom that 'those who fail to plan, plan to fail' is frequently true when it comes to succession planning.
According to Christian Stewart, head of Wealth Advisory Group, JPMorgan Private Bank Asia-Pacific, feedback from presentations and seminars suggest that while many Hong Kong business owners are aware of the need for succession planning, many fail to do anything about it.
'Probably less than half of the people we talk to have made any effort to put into place a meaningful succession plan,' Mr Stewart says.
A succession plan is usually a written document that provides for the continued operation of a business in the event that the owner leaves the company, retires or dies. The document details the changes that will take place as the leadership of the business is transferred from one generation to the next.
Succession planning agreements normally outline what will occur when it comes to allocating shares of stocks, assets and other financial considerations.
The plan can also include provisions for a Family Council arrangement, which allows family members to make decisions on issues such as philanthropy.