CHINA Trends and Developments Contributed by: Jun Zhang, Xiaochu Zhang, Yifan Lai and Wan Hu, Beijing Dacheng Law Offices, LLP
Beijing Dacheng Law Offices, LLP 16-21F, Tower B ZT International Center No 10, Chaoyangmen Nandajie Chaoyang District Beijing China
Tel: +86 105 813 7799 Fax: +86 105 813 7788 Web: www.dachenglaw.com
Analysis of the Reasons for the Lack of Contemporary Family (Business) Succession Planning and Arrangements – Changing Entrepreneurs’ Perceptions is the Key to Solving the Problem Several recent high-profile cases of disorderly or failed family (business) succession have attracted widespread social attention. Succession planning and arrangements involve three dimensions: the family, the family business (operating assets) and family wealth (non-operating assets). For the family, this means establishing intergenerational leadership; for wealth, it concerns how to distribute, inherit or centrally manage assets; for the business, it involves not only planning the ownership structure but also the transfer of the sceptre. In addition, there is the important issue of the continuity of family culture. The unbearable sorrow and pain of unplanned succession In recent years, we have handled numerous cases of internal family disputes arising from the lack of suc - cession planning among domestic and foreign entre - preneurs. Some cases were resolved through litiga - tion, while others found a “third way” of reconciliation through the efforts of all parties. Regardless of the resolution method, all have caused enormous damage to family relationships: parents and children turning against each other, siblings becoming enemies, and even conflicts between grandparents and grandchil - dren. Even more devastating is the severe negative impact on the present and future of the family (busi - ness). Most enterprises struggle to survive, end up being split up, or are liquidated and exit the market.
Looking at the widely discussed succession cases of actual controllers, major shareholders of listed com - panies, and well-known entrepreneurs at home and abroad in recent years, we find that more than 60% have varying degrees of deficiencies in succession planning and arrangements. While a few cases have overcome succession crises through family wisdom and capabilities, a much larger proportion have trig - gered succession conflicts. The typical cases are well known and continue to be discussed or hyped online. Out of respect for the entrepreneurs and their families, we will not list them one by one. As professionals, we have not only witnessed the various human tragedies caused by the lack of plan - ning but also the multiple dilemmas and life-or-death challenges facing families (businesses). Every service experience brings us a deep sense of pain and pro - found regret. We always feel that things should not have turned out this way, and we can only sigh help - lessly. Despite our best efforts, we are often powerless in the face of the intense attachments born of love. This inevitably leads us to ask: Why have these entre - preneurs, who possess enormous wealth and resourc - es, failed to make succession plans and arrangements, even lacking the most basic wills? What are the key reasons? And how should we solve this problem? Entrepreneurs have multiple cognitive barriers to succession planning and arrangements In practice, the reasons for the lack of planning and arrangements are extremely complex and intertwined, often resulting from multiple causes. Overconfidence,
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