A sliding scale
Family succession is in decline in Ireland and this trend is set to continue, new research at University College Cork reveals.
The research carried out by Dr Bernadette Power and Dr Geraldine Ryan found that declining family sizes and an increase in opportunities for potential successors were the main contributing factors to the trend. Their research suggests that since small businesses are extremely vulnerable to leadership loss, it is imperative that they consciously plan for, and manage, leadership succession.
However, when compared to the UK, the tradition of family business succession is still relatively strong in this country.
Of the 392 owner-managers interviewed, 36pc said they intended to transfer the business to a family member.
In 89pc of cases, the businesses were transferred to offspring where they demonstrated their prior commitment to the business. Generally the successor had worked in the business preceding its transfer.
Succession planning was considered important by these family businesses and 71pc had a succession plan. The research found that there was openness about this exit plan among family members.
However, there was some evidence of sibling rivalry where brothers and sisters were capable and willing to take over the operation at the time of transfer.
On average, the ownership of family firms in Ireland was transferred twice within the family.
However, the researchers warn that if the family business is a farm, the predecessor should be aware of the recent Commission on Taxation report, which proposes that agricultural relief for capital acquisitions tax be limited by reducing the discount on the market value from 90pc to 75pc. If the Government adopts these proposals, the tax liability of parties to the transfer will increase.
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