Prepare your company for succession

What happens to your business, if you pass away unexpectedly? This is probably not something you do often think about.  But according to notary Aniel Autar and director of the Dutch Association of Insurers Harold Herbert, there are several things you can do to prepare your company for when you are no longer here. That way, your successors will not have to face unexpected surprises.

1. Make a will

In a will or testament, you record who will be the business successor and which other persons or institutions are heirs. Do you have a large capital? In that case, a will helps to settle the inheritance tax more easily and more economically. You draw up a will at the notary.

What if you do not have a will? Then the legal inheritance law comes into effect when you die. This right of inheritance determines who the heirs are. In that case, all assets and debts of your company are transferred to your heirs.

2. Make use of an 'entrepreneurial will'

In a will, you arrange the division of your assets and debts after your passing. This division usually takes a while to arrange. To keep your company under proper management during that time, it is wise to draw up an entrepreneurial will. In it, you indicate what should happen to your company when you are no longer there.

Autar advises to make a will right at the start of your company. “Make sure you name an executor. In the event of death, the executor immediately arranges the practical matters for your company; if an heir does this, creditors can assume that the heir has accepted the inheritance in good faith. If the estate turns out to be negative, the heir will have to pay out of their own pocket. That is a situation you want to avoid.”

3. Include stipulations in the partnership contract

Do you have a general partnership (vof) or professional partnership (maatschap)? Then make arrangements to ensure that the partnership does not disintegrate upon your death. To do so, add stipulations to the partnership contract that allowthe remaining partners to continue the business (possibly with a new partner). 

Continuation clause

With a continuation clause (voortzettingsbeding) you arrange that the contractual legal relationship between the remaining partners is maintained if you pass away. The partnership will then not be dissolved.

Survivorship clause

With a survivorship clause (verblijvensbeding), your share is transferred to the remaining business partner(s) in the event of resignation or death. They pay you, if you resign, or your heirs a sum of money equal to the value of that share. 

Allocation clause

With this clause (toescheidingsbeding), the share of the retiring or deceased partner is not automatically transferred to the remaining business partner(s). The allocation depends on an agreement between the withdrawer or his heirs and the other partners or partners. The share must be offered to the remaining partners. 

Takeover clause

This concerns assets that are legally owned by one of the partners, but that are used for the partnership. The takeover clause (overnamebeding) stipulates that in the event of the resignation or death of a partner the others have the right to take over the assets that are legally the property of the withdrawer or deceased.

4.Take out a term life insurance policy

With a term life insurance policy you arrange that your dependents receive a benefit for a certain period after you have passed away. This way you ensure that they do not get into financial problems.

According to Herbert, especially self-employed professionals (zzp’ers) underestimate the financial consequences for the next of kin. “It often goes wrong. That someone dies without arranging any provision for the next of kin. Sometimes a partner may think 'well, then I will look for a job', but that is not always possible."

5. Business partner insurance

If you work together in a general partnership or another legal form, you form a team. You reinforce each other and you work together on assignments. If your business partner dies, heirs can claim part of the company. The business partner insurance then pays out a sum of money to the heirs, buying out the part of the company that belonged to the deceased, so that the business can continue.

6. Provide overview

Autar says that many entrepreneurs keep all business information in their head. In other words, the home front knows nothing about the company. It is useful if your relatives can easily find your business records. For example, current orders, bank accounts, insurance, subscriptions, contracts, who is the bookkeeper. Clear administration helps with this. And what about your passwords? Make sure that your next of kin can find your passwords at a fixed agreed location (company network, accounts at authorities, and social media accounts). Autar: Make sure that your next of kin are aware of what is happening within the company. And that they at least know and trust your most important advisors. Do not keep your heirs in the dark.”

7. Bereavement Support Team

Make sure your next of kin and business partners are aware of the Bereavement Support Team (Nabestaandendesk). You will find help with, for example, the deregistration of the deceased from the Netherlands Chamber of Commerce KVK Business Register. As soon as someone dies, the KVK Business Register is automatically notified via the Personal Records Database (BRP).

Do you have any questions?

Do you have questions about how you can prepare your company for when you are no longer there? Please contact KVK. Together we will look into your situation and see how we may help you.

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