Generational change of a principal shareholder company will often have a significant financial effect on the parties involved. The legislation in the subject area is extensive, and there is a lot of different ways to carry out a generational changeover. But how is a generational changeover carried out optimally under the current legislation with regards to tax and liquidity? This Master thesis will review current legislation on generational change, and through a case study, it will answer how a company with a majority shareholder can most optimally execute a generational change within the legislative framework. The thesis includes an analysis of the tax implications in cases where the owner is dead as well as alive. An optimal generational change must encompass the needs, wants, and opportunities of the par-ties involved; the owner, the successor, and the company. Furthermore, the legal frameworks must be established. Whether or not the succession has been initiated while the owner remains alive, it is possible, under certain conditions, for the successor to take over the company’s deferred tax on the shares. Furthermore, tax regulations allow the company to restructure in order to achieve the desired source of financing, with a possibility of a tax-free dividend payout or selling of shares. Tax regulations also include requirements for the valuation of the company, which have a major influence on the financial impact of a generational change. In many cases, the successor does not have the capabilities to finance the entire sum. The A/B model is commonly used to handle generational change. The model implies that the company finances the sales price to the exiting shareholder in the form of dividend payments, so that the successor does not have to finance the entire sum. Furthermore, the transfer of shares does not incur taxation, as the dividends can be paid out tax-free to the successor’s holding company.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||150|