Belzuz Abogados, S.L.P. has advised numerous clients with family-owned companies and businesses who frequently express concerns regarding the protection and continuity of the business in a succession context.
In this regard, we consider it relevant to address, in particular, the situation of a commercial company whose share capital is mainly held by shareholders related by family ties and whose objective is to ensure that, after their death, the operation of the company remains within the legal sphere of their respective successors.
In simpler terms, the shareholders are the ascendants – typically the founders of the business – who intend that their children, after their death, keep the company within the family, continuing the business project and preserving the value created over a lifetime of work.
The reality is that, not infrequently and for a variety of reasons, the descendants of these entrepreneurial shareholders have incurred substantial debts – whether personal or as guarantees for third parties – to such an extent that their own assets are insufficient to satisfy them.
In such cases, the ascendants (holders of the shareholdings) fear that the business may be lost, since, once included in the inheritance, those shareholdings become liable for the descendants’ pre-existing debts, allowing third-party creditors, in the event of default, to enforce against those assets and, in doing so, potentially take control of the family business, thereby losing its essence.
There are, however, ways for ascendants who hold shareholdings to safeguard, during their lifetime, the future of the company, mitigating the risk of those shareholdings being exposed to enforcement for their descendants’ prior debts (and only those).
Among other solutions, particular attention is given to the formalization of a clause excluding liability, aimed at releasing assets donated or transferred by succession from the satisfaction of debts existing at the time of the gift or the opening of the succession.
In the case of assets subject to registration, such as real estate, it is important to recall that the enforceability of this exclusion clause against third parties is also subject to registration, failing which the assets will remain liable, notwithstanding the clause, for both prior and subsequent debts, with priority being given, for example, to a creditor who registered a seizure before the registration of the clause. These registration-related restrictions are intended to protect third parties and legal commerce in general, since, without registration of the clause, the legal appearance remains that such assets are liable for the debts of their holder.
This issue has given rise to considerable doctrinal debate, as, if validly constituted, such a clause may have effects even in relation to a descendant/beneficiary who is insolvent or on the verge of insolvency, preventing the protected asset from being included in the beneficiary’s insolvency estate to satisfy debts incurred prior to the succession acquisition, only allowing such liability in respect of debts incurred after that acquisition.
Therefore, for owners of family businesses who identify with the issues addressed herein, it is advisable to seek professional advice and analyze their specific situation.
Belzuz Abogados, S.L.P. has professionals with extensive experience in commercial and corporate law who can assist all types of companies with a wide range of matters, providing comprehensive legal support and advice.