When handing over a family business, it is crucial to preserve its philosophy.

The transfer of family businesses is an increasingly common topic in the Czech Republic as the group of entrepreneurs who started in the 1990s grows older. Jakub Hollmann and Michal Pomahač discussed various methods of handling business succession in the Forbes BrandVoice podcast.

Jakub Hollmann is the chairman of the supervisory board of CCS Premium Trust and recently authored a book on trust funds, which are becoming an increasingly popular way to handle business succession. Michal Pomahač represents the second generation in the family business that runs the door manufacturer CAG and the Kytín Brewery.

Both agreed that preserving the company’s philosophy is key when transferring ownership. “When a company is passed on, usually its founders want their vision to be followed. They want the reason why they started the company, and the philosophy they put into it, to be passed on to the next generation,” Hollmann stated.

Pomahač agreed: “Even after years, I see that preserving the philosophy is what keeps my father involved in the company. When you live with a company for so long, it’s not easy to let go and hand everything over.”

The most common forms of business transfer in the Czech Republic are still wills and gift contracts. Trust funds have been used in the Czech Republic since 2014, and interest in them is growing. There are currently about five thousand such funds in the country.

Their uses vary, but the most common are family funds designed to set aside part or all of the assets to preserve them for future generations. Family members can then benefit from the fund according to rules set by the founder.

Almost any type of asset can be placed into these funds. This can include intellectual property rights, claims, valuables, trademarks, cars, artworks, or shares in companies.

Alternatively, it can be assets the founder cares about and wants future generations to care for in order to have access to the fund’s resources—such as a family estate, a charity, or anything else.

Moreover, the founder can set precise rules according to which descendants are entitled to profits from the fund.

“For example, just before Christmas, we set up a trust fund where the entire family must gather every year at the Christmas Eve table,” Hollmann recalls.

How to properly transfer a family business to the next generation? Are trust funds suitable for this? How exactly do they work and how should they be set up? Listen to the next Forbes BrandVoice podcast.

Forbes.cz, January 25, 2023