Succession of Shareholdings in Jørgens Tandhjul A/S

Simon Mørner Nielsen

Student thesis: Master thesis


The main topic of this master thesis is succession of shareholdings from one generation to the next generation. The master thesis begins by describing the theory on succession. Based on the theory, a solution for the fol- lowing real life problem will be made: “How to minimize costs to taxes and fees related to the succession of the shareholdings in the company Jørgens Tandhjul A/S from father (Jørgen) to children (Daniel and Jenny).” Succession of shareholdings is a long and complex process, which requires planning and time. This thesis is target to demonstrate how to make an ideal practice example of this transfer. The example is based on the case company Jørgens Tandhjul A/S from father to children. The business transfer is constructed as realistic as possible by using the Danish tax rules.
Current tax rules and restructuring options related to succession have been reviewed in order to facilitate a smooth transfer of Jørgens Tandhjul A/S in compliance with legislation. Jørgens Tandhjul A/S is unlisted and the value of the company shares is on basis of 2016 annual accounts calculated to tDKK 20,630 in accordance with the 2000-circular. Due to new legislation, the gift fee will decline from 13 % in 2017 to 5 % in 2020. An assumption to this thesis is that the business transfer starts in 2017. It could be an advantage to postpone the business transfer to 2020 due to the lower gift fee.
Three different succession models have been made based on the calculated value of the company’s shares. The models have different strengths and limitations. The models have the same main assumption that the father have to receive an output of tDKK 8,450 after tax for the transfer of his shares. The value of the business transfer is paid partly as gift to the children and partly from bank loans. All the models is due to comparison based on the same assumptions. The assumptions include a deferred tax price of 70 % and an interest from banks of 4.5 %. Both children use their private savings of tDKK 200 to pay for the transfer. The children end up owning 50 % each of the shares in Jørgens Tandhjul A/S directly or indirectly. Adviser expenses and cost of borrowing are not taken into considerations. The main assumption is Jørgen’s capital need that is calculated to tDKK 8,450.
A comparison of the three models results are made. Based on the given assumptions, I conclude that model 2 is the best model for all involved parties. Model 2 fulfills the father’s economic needs and has the lowest cost for the children and an appropriate timeline based on the wishes of the involved parties.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2017
Number of pages83