CHINA Trends and Developments Contributed by: Jun Zhang, Xiaochu Zhang, Yifan Lai and Wan Hu, Beijing Dacheng Law Offices, LLP
Unexpected events Life is impermanent, and impermanence is the norm. Even if entrepreneurs are invincible and extremely wealthy, they are vulnerable in the face of nature and health. How many domestic and foreign entrepreneurs have died prematurely in recent years? Too many to count. And in the event of an accident, having no arrangements at all is the most common situation. In a sense, succession planning and arrangements should not start only when the generational succes - sion period arrives. They should be initiated when greater responsibilities for a family, wealth, business or society have been assumed. In this sense, one should start succession planning and arrangements from the day one becomes an entrepreneur. Perhaps this arrangement starts with a will to prevent accidents, but it must start. Inappropriate planning Some entrepreneurs have made succession arrange - ments but they have chosen the wrong methods, wrong implementation paths or wrong tools, failing to achieve the desired effects. For example, since it involves both ownership issues and the transfer of the sceptre, it is very difficult to smoothly achieve the succession of a family busi - ness through traditional tools such as testamentary arrangements in situations with complex corporate or family relationships. The most typical example is a Taiwanese shipping magnate who transferred the sceptre to his youngest son through a will, but the youngest son was forced to leave within three months, and subsequent law - suits lasted for many years. The reason was the lack of support from the ownership structure, leading to the failure of the plan. Of course, there are numerous cases of disputes over will arrangements, often hap - pening around us. In recent years, we have seen an increasing number of implementation dilemmas in succession planning and arrangements. Even if the equity of the enterprise is dis - tributed to respective owners, the enterprise may come
to a standstill due to control disputes or corporate dead - locks, which is a very prominent phenomenon. Entrepreneurs should change their perceptions and take action Entrepreneurs should first solve the problem of the lack of succession planning and arrangements, and then improve the effectiveness of succession plan - ning through the effective integration of logic, paths, technologies and tools to achieve their wishes. We believe that this should start with changing entre - preneurs’ perceptions. • Even the most brilliant and invincible cannot escape the impermanence of life. Accidents hap - pen every day, and they happen when you least expect them. • In the face of enormous wealth and power, all love and expectations will turn into attachments, and reason and emotion often take a back seat, becoming worthless and vulnerable. • Succession planning and arrangements are not a right but a responsibility. Otherwise, what you see from heaven will most likely be chaos and devasta - tion. • The power of division is greater than the power of unity. The challenges of capability and willingness, cohesion and independent development have always existed for every family; sometimes how - ever they are ignored. • The ability to concentrate and restructure owner - ship is a necessary gene for the long-term prosper - ity of a family (business). Centralisation along the main line is very important and necessary. • People are the most “unreliable”. We must rely on structural tools. Only structural power can ensure that sincere consequences arise for the right peo - ple at the right time. • Never fantasise about achieving the succession of a family business through a single will. The co- ordinated realisation of ownership inheritance and sceptre transfer is the right way and is crucial. • Avoid repeatedly wandering in grand narratives. Starting from the most urgent demands and the simplest tools is the real starting point. • Prioritise arrangements during one’s lifetime and supplement with posthumous arrangements. The
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