Succession Process: With Focus on Succession to Commercial Foundations

Regitze Jønholt & Michelle D. Miller

Student thesis: Master thesis


Today generational handovers to commercial foundations are subject to substantial tax payments, imposed on both the retiring shareholder as well as the ongoing foundation. Legislation on change of ownership to foundations has not always been so tight though. In Denmark, many of today’s most successful companies, are owned by commercial foundations, all established before 1999, when the new reform, Pinsepakken, was adopted. Pinsepakken put an end to juristic persons inheriting an ongoing business with succession in terms of tax, which nearly stopped the popular generational handovers to commercial foundations.
Research shows that many companies, within the next 10 years, will be facing a generational handover. It is the general assumption, that groups owned by commercial foundations contribute highly to the Danish welfare; creating jobs, being innovative and having high competitive strength. Thus, we find it particularly interesting to study the possibilities of restoring a set of rules for tax succession for commercial foundations. It is our primary focus to find a way, to make it attractive for a company owner, to donate his or her company to a commercial foundation, instead of donating the shares to the next generation.
To find the best possible model for generational handovers to foundations, we will research the regulation on handovers in general, as well as study the laws regulating commercial foundations.
This issue is not new, and in 2015, the Ministry of Taxation in Denmark, published a proposal for a model, allowing commercial foundations to succeed in the retiring shareholders original tax position. Our analysis of this model will show some flaws though, which we believe, will still discourage many company owners from establishing foundations. Besides analysing the model prepared by the Ministry of Taxation (combined with relevant articles), we sought inspiration on better models for generational handovers from other comparable countries.
The study resulted in our own recommendation for a new, more attractive, and more useful model for taxation of generational handovers to commercial foundations – both relaxing the rules for the retiring shareholder as well as for the ongoing commercial foundation.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages122