Any short-term credit plan is a compromise. If you are unable or unwilling to delay your disposal for at least two years, you will be severely limited in what you can do to improve the value and saleability of your business. The shorter your planning period the harder it will be to prepare your business properly for exit. Using the 10 steps from previous post as a guideline, we summarise below what you are able to achieve in this time.
frame as follows
Step 1: Time frame You have chosen a short-term plan (or one has been forced on you).
Step 2: Structure
a) Although you will have time to enter into a shareholders’ agreement, you might find it difficult at this late stage to get your fellow shareholders to agree with your terms, particularly if they know you want to exit shortly.
b) Tax minimisation: Under current tax laws you are required to own assets in your own name for a minimum of two years to take full advantage of business asset taper relief from Capital Gains Tax.
Step 3: Choosing the optimum exit option
You are limited in your choice of exit option, because of the amount of time that is needed to prepare for some options (see above).
Step 4: Tailoring your business to suit your exit option
This is something that should, ideally have begun at start-up. This is not something that can be done with only two years to exit.
Step 5: Grooming of management or successor
It is not easy to generalise here. But you would usually need two to four years to groom senior management to take over ownership of your business. So, while some family succession experts advise allowing 15 years to groom successfully an heir for owner/management. The actual time required will depend on the quality of the management and the personal attributes of the successor. But a period of two years’ grooming for managers and five for heirs is probably the minimum. short-term credit plan