Traditional Generational Change Versus Fund Solution

Kristian Novaa

Student thesis: Master thesis

Abstract

The purpose of this research is to conduct a comprehensive analysis of the prospects for a generational transition of ownership, particularly focusing on traditional and corporate fund solutions. Factors that contribute to a successful handover of family-owned businesses will be examined, including tax, restructuring, and financing considerations essential for an efficient transfer of ownership. The study will compare the benefits and drawbacks of traditional versus corporate fund approaches, highlighting how inadequate planning and preparation often lead to negative economic impacts for Danish owner-led businesses. The corporate fund solution will be evaluated as an alternative, analyzing its advantages, and contrasting them with the traditional method.

The research will also consider the crucial decisions involved in selecting the best restructuring and financing alternatives for interested parties during a generational handover. This will be compared with the government's regulatory proposal for business handovers to a corporate fund, which can be accomplished through succession without triggering any tax payments. Furthermore, the study will explore the socio-economic factors that motivate business owners to choose the optimal corporate structure for a generational handover. To illustrate these points, various restructuring models will be chosen, and a fictional business case will be analyzed. The business owner has already considered different options for a generational handover but has not yet decided how to execute the transfer or which restructuring models to use to wind down the business and optimally prepare for a potential generational handover, given that his children have not yet expressed interest in taking over the business.

On this basis, the analysis will explore restructuring models under different scenarios to examine the taxation of the business handover, including the liquidity and tax challenges associated with each restructuring model applied. Finally, considering the new government legislation, the thesis will analyze whether a business handover to a corporate fund with succession is a more beneficial alternative to traditional business handover. In summary, this research aims to provide a comprehensive understanding of the opportunities and considerations associated with a generational handover. The outcomes of this study will add to the literature on generational handovers of mid-sized businesses and offer important insights for business owners, professionals, and policymakers involved in this process.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2023
Number of pages85