Opening up your company’s capital while preparing succession

The situation

Our support

1. 01

   Balancing personal liquidity and reinvestment

   We first modelled several scenarios to allocate the shares between:

   • those sold directly to the fund, to release personal liquidity;
   • those contributed to a holding company before their sale, to finance new investments;
   • those kept by the director, so that he remained the majority holder;
   • those intended to be transmitted gradually to his children.

   For the portion earmarked for reinvestment, we put in place a contribution-disposal falling within article 150-0 B ter of the CGI and secured the reinvestment conditions for the sale proceeds.

   Example: for sale proceeds of €10 million received by the holding company less than three years after the contribution, at least €7 million (i.e. 70%) must be reinvested on the conditions and within the time limit set by the currently applicable regime, so that the sale of the contributed shares does not end the tax deferral.
2. 02

   Structuring and securing the reinvestments

   We then identified the investments compatible with the director’s objectives and the conditions of the tax regime:

   • direct investments in new activities;
   • stakes in operating companies;
   • subscription to eligible investment vehicles;
   • retention of a freely available pocket for his personal projects.

   Our work covered the characterisation of the investments, their timing, their documentation and their monitoring over time, in order to prevent any challenge to the tax deferral.

   Point of attention. Securing a contribution-disposal does not depend on the reinvested amount alone. It also requires checking the nature of the investments, the reinvestment time limit and the applicable holding conditions.
3. 03

   Preparing the family transmission of the business

   In parallel, we studied a shared gift (donation-partage), on the basis of articles 1075 et seq. of the French Civil Code, in order to organise lots suited to the situation of each of the three children.

   The structuring contemplated made it possible, in particular:

   • to allocate part of the shares to the child likely to take over the business;
   • to transmit other assets to the children who would not take over;
   • to use, if necessary, a balancing payment (soulte) to rebalance the lots;
   • to freeze the values used on the conditions specific to the shared gift.

   We dovetailed this transmission with a Dutreil pact provided by article 787 B of the CGI, after analysing the company’s activity, its governance, the management role and the required holding commitments.

   Simplified example: for shares valued at €8 million, the 75% exemption provided by the Dutreil pact may, subject to compliance with all the conditions of the regime, reduce their value subject to transfer duties for no consideration to €2 million, before applying the allowances and the scale.
4. 04

   Organising a gradual transmission through dismemberment

   Finally, we compared a full-ownership gift with a gift of the bare ownership of the shares, valued under the scale of article 669 of the CGI.

   This second option could allow the transmission to begin while leaving the director the usufruct of the shares and the prerogatives attached to it, provided they were organised in the articles of association and the gift deeds.

   Simplified example: where the bare ownership represents 60% of the full ownership for tax purposes according to the age of the usufructuary, the gift of the bare ownership of shares valued at €2 million is based on a tax value of €1.2 million, before applying any allowances or exemption regimes.
5. 05

   Coordinating and securing the implementation

   We drew up a roadmap specifying:

   • the perimeter of the shares sold, contributed, kept and transmitted;
   • the order in which the various operations would be carried out;
   • the commitments and formalities required;
   • the governance adjustments;
   • the reporting obligations and the supporting documents to keep.

   We also coordinated the implementation with the notaire, the advisers in charge of the transaction and the director’s other advisers.