Generational change in a class C enterprise

Abstract

The purpose of the thesis is to show the possibilities that business owners have, to make a generational change and pass the company from a parent to their children. And furthermore, the tax implication in the current tax environment.
The subject is governed by the Danish law and the changing Danish political scene have resulted in some ongoing major change in the tax laws regulating the subject. When the Social Democrats came to power in 2019, they reverted the inheritance tax to the original level of 15%. These uncertainties have contributed to the fact that many generational transitions are still pending. After the election in 2022, where the SVM government was formed, there were plans to reduce the inheritance tax from 15% to 10%.
Additionally, the transition of ownership of a company from a parent to its children is a process which demand a lot of planning regarding factors concerning personal and company economic, including tax conditions, considerations if the current owner is emotionally ready to pass the company to the next generation. Lastly, it is important to consider the time perspective because the execution of this may take several years.
The first part of the thesis will describe the company, the participants of the generational change and the initial, personal, temporal, and economic considerations that participants in a generational transition must consider. Following this, the thesis will describe and analyse the valuation of the case company AP Ren A/S. This also entails the possibility of conducting the generational transition of AP Ren A/S as a regular taxable sale between the participants.
The second part of the thesis will describe and analyse the restructuring models for use in the genera-tional transition of AP Ren A/S. Subsequently, the thesis will assess these restructuring models against each other to find the most optimal solution. Furthermore, the thesis will describe the options available to the participants in the generational transition for financing the transfer of AP Ren A/S, including through self-financed or external financing via banks, debt instrument, gifts, or earn-out. The thesis will assess the most advantageous among these four choices.
The final part of this thesis will provide a proposed solution for how Albert carries out the generational transition to his children based on the thesis's review of valuation and restructuring models.