Evanna Phoon wrote the below article and she is a Senior Franchisee of Rockwills. She can be contacted at firstname.lastname@example.org * This article written by Evanna Phoon appeared in Malaysia SME newspaper *
What Makes a Successful Family Business Trust?
The definition of family business is the children of the founder must be in the organization, working in it already. Most of the time, family business actually outperforms non-family businesses. Some of the reasons why is because they have very high commitment and dedication. I guess because the founder actually has a certain values, certain philosophies or a certain vision that he was to carry throughout the business. Not just carrying out his vision within the family members but also with the staffs, and they are willing to pass all the experiences to the next generation and at times, to even their staffs and they take pride in the family name. These are some examples of the large family businesses in the world for example, like Ikea, Hyundai, Toyota, Cadbury etc.
Looking at Malaysia, in term of family, we are very close, we have values that we keep among ourselves and within the family, values that we also share with our staffs that make our staffs continue to work with us and perform the best that they could because these are all the factors that actually makes a family business survive and outperform non-family businesses. Successful family business owners know how to make their staffs work with them? A serious pause here that I would like to highlight that it’s “Work With Them, not Work For Them.”
This can be achieved so much easier during the first generation, during the life of the founder, that he decides everything. He will says ‘we do this’ then people will do, ‘we do that’ and then the staffs will do. But come to second generation, when his child (his son or his daughter or some of his sons or spouse of his daughter) comes into the business, what will happen?
Being a human being and being in a family business, you can’t put emotions aside. And also, you have not thought about succession planning. You have not plan how the business are going to move to the next generation, that’s when you are too focus on your business.
Planning for succession for family business means higher probability for the business being transferred to the next generation and many generations to come. In this issue of Malaysia SME, I share with you a simplified version of a complete family business trust (see picture 1).
Four major structure that make up the components for a complete family business trust. First, Family business and investment holdings, Second: Asset protection structure. Third is an oversight structure and Forth is the Family Governance Structure.
First, we’ll have the family business and investment holdings that make up majority of family wealth and income. This high value of wealth must to be treated properly and to have an Asset Protection Structure to prevent shares being directly inherited or owned by family members. We have discussed the various risks of having the descendant to have direct ownership of the shares in previous issues. For example, assets are subjected to adverse claims, claims arising from divorce of children or spendthrift descendant etc. The third component is an advisory committee to oversee issues or conflicts, this advisory committee can be a trusted entrepreneur friend, professionals like accountants or company secretaries or business coaches. And finally, family harmony and ties can be strengthened if there’s proper family governance structure in place.
We’ll go in detail in future issues. Stay Tuned.
About the Author
Evanna Phoon is CEO & Founder of www.MalaysiaWills.com, a franchises of Rockwills International Group & as-Salihin Trustee Bhd. In 2010, she started Malaysia’s first Online Will Writing Service to help overseas Malaysian plan for their Wills & Trust. In March 2012, she became the first and only person in Malaysia to successfully market Trust services using Webinar series. She can be contacted via email@example.com.