CHINA Trends and Developments Contributed by: Jun Zhang, Xiaochu Zhang, Yifan Lai and Wan Hu, Beijing Dacheng Law Offices, LLP
However, the key question is: Are these grand visions the most urgent? Is there consensus within the fam - ily? Does the family have the corresponding founda - tion and prerequisites? What is the most appropriate roadmap or sequence? Facts have proven that it is very difficult to transform an entrepreneur’s will into the common will of the fam - ily. Many families simply do not have such consensus- building capabilities, and they are also unwilling to seek corresponding professional support externally. As a result, most struggle under grand visions. Opposing opinions within the family are never expressed as “disagreement” but through various forms of silence. We have encountered many similar situations: families have discussed succession plan - ning for many years with grand goal frameworks, but cannot reach a consensus. After several years, noth - ing has been started or implemented, yet a succes - sion event occurs, and the outcome is predictable. Finding the real starting point is important, but it is not an easy task. Entrepreneurs’ succession planning often faces many limitations and impacts In addition to the four core reasons mentioned above, limited pathways, limited tools, unexpected events and inappropriate planning are also important reasons for the lack or ineffectiveness of succession planning For complex reasons, there are not many people entre - preneurs can trust. As the family (business) develops to a certain scale, entrepreneurs often feel that there are fewer and fewer trustworthy people. In many cas - es, decision-making relies only on the advice of a few people around them who can only provide emotional value. These people may not have the knowledge of succession planning, or due to the sensitivity of the topic and their own positions, it is difficult for them to put forward effective suggestions on succession plan - ning and arrangements, let alone provide solutions. At the same time, many entrepreneurs believe that succession planning and arrangements require and arrangements. Limited pathways
extreme privacy and can only be completed with the assistance of trusted people around them. However, these people or the professionals around them may not have such professional capabilities. As a result, many so-called succession plans we see are inef - fective, leading to various situations such as assets that should be divided not being divided, assets that should be consolidated not being consolidated, and matters that should be arranged during one’s life - time being arranged posthumously. There are even frequent cases of invalid will arrangements, which is truly regrettable. We often hear entrepreneurs say that their succession plans and arrangements have been completed, but in the end, it is a complete mess, and nothing that should have been done has actually been done. Limited tools Overcoming “time and human nature” with “strength and flexibility”, expanding people’s influence in terms of time and scope, and managing uncertainty with cer - tainty are the basic logics of both family wealth manage - ment and family succession. These can only be realised through structural legal tools such as family trusts, fam - ily foundations and family holding companies. Family (business) succession is diverse. Families with multiple children and complex relationships have their own difficulties, while families with only one child and simple relationships also have their own challenges. Whether complex or simple, succession through structural legal tools is an inevitable choice. This has not only been proven by a large number of domestic and foreign practical experiences but also supported by corresponding theoretical research results. Many entrepreneurs, due to limitations in cognitive ability, have no basic knowledge and understanding of the above structural tools, let alone choosing and using them. Succession demands that can be easily and comprehensively met through simple arrange - ments with structural tools are extremely difficult to achieve with traditional tools. In short, the toolbox of entrepreneurs for succession is seriously insufficient, and they have too few means at their disposal.
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