Family Business Succession in Austria

Family Business Succession in Austria

The Importance of Family Businesses

We all know the topic from numerous books, movies and TV series. Thomas Mann’s “Buddenbrooks”, HBO’s “Succession” or books about real business families such as the Krupps or Henkel – the rise and sometimes also the fall of these families, their companies and the personal fates associated with them fascinate and move a large number of people.

Whereas some publications just serve the peoples sensationalism (Thomas Mann excluded) the real part of the fascination with family businesses lies in the fact that they are actually an essential part of many people’s lives. Family businesses are part of families. Around 1.9 million people in Austria are employed in family businesses. The owner family usually has a decisive influence on both social and political issues in the region in which it operates.

Numerous charitable projects are initiated and supported by family businesses. Family businesses assume responsibility far beyond their companies, for the families of their employees and for the region, and thus represent an important backbone of the Austrian economy.

It must be acknowledged that family businesses are such attractive employers and business partners precisely because the owner family represents a stable constant with handshake quality that is also willing to assume responsibility and which actions are strongly based on values.

The successful handover

In the coming years, more family owned companies will be handed over than ever before. Also, the fact that Austria currently does not levy gift or inheritance tax encourages the transfer of family assets.

Austria provides for several corporate options to structure family businesses. Depending on size and owner family partnerships, companies with limited liability or even private foundations may be a suitable solution. Such corporate structures may be supported by a family-charta or family boards in order to safeguard that the family’s principles remain recognized in strategic business decisions.

If we now consider that, in addition to the question of who should take over the company, family businesses also have to decide how the values and ideas that have historically grown in the company, which have made the company what it is, which have virtually created the company’s own, family DNA, should be continued and lived by the next generations, the question of a “successful handover” quickly reaches a level of complexity that goes beyond questions of corporate law and taxation.

The family dialogue

The good news is that one can trust that despite the complexity of these issues, the owner family itself knows the answers to these questions best.

Indispensable to this is the willingness for an open dialogue about the possible structuring of a succession within the family. Within this dialogue the family can exchange ideas about common values and goals. The next generation is called upon to contribute its ideas and wishes just as much as the handing-over generation. In the best case, old and proven ideas should be complemented by new ones to form a future-proof whole.

One product of such an exchange can be a family constitution, which represents a kind of morally binding intergenerational contract. Another product of such an exchange can be the assignment to a lawyer and tax advisor to examine and implement the very structuring desired by the family.

The great advantage of this approach is that the family members involved will be much more accepting a solution worked out independently in this way than a solution presented to the rest of the family by one family member’s advisor.

Of course, an experienced advisor can assist families in drafting a family constitution and/or structuring a succession plan. However, such a consultant should by no means act in an advisory capacity, but should be the facilitator of a constructive and thus value-creating dialogue within the family.


There is a reason why family businesses have been so successful and innovative for generations – each owner family was able to find its own unique way to success. This fact should give trust in the succession structuring process and shall also guide and strengthen the next generations.

hoyos e1675436014360

Philipp Hoyos

Schindler Attorneys
400px Blank square

Daniela Steiner

Accrual of inheritance involving assets abroad often underestimated

Accrual of inheritance involving assets abroad often underestimated

Accrual of inheritance involving assets abroad often underestimated

An international accrual of inheritance is given when for example a German testator holds assets abroad or vice versa a foreign testator holds assets in Germany. Due to the different national regulations in each country the international assets of e.g. Germans involve significant civil and fiscal-law risks if not structured carefully. Therefore it is advisable to concern oneself with this subject during one’s lifetime and to take corresponding measures if possible.

The complexity of international accrual of inheritance is frequently underestimated. As a fundamental rule, accrual of inheritance with a foreign connection and thus an “international accrual of inheritance” is given as soon as a German testator holds assets abroad (e.g. a finca in Spain), or upon the death of a foreigner holding assets in Germany. The international assets of Germans involve significant civil and fiscal-law risks if not structured carefully.

The reason lies in the fact that, as a fundamental rule, the national law of succession in each country regulates who will become an heir, the level of inheritance shares or compulsory portions, which formal regulations apply to wills and the manner in which heirs can prove their rights. The national regulations of the individual countries are very different in this respect. These differing regulations can mean that the same accrual of inheritance is assessed and treated differently from country to country. In addition, certificates of inheritance from one country are in part frequently not accepted in other countries. As a result, it may be necessary for heirs to make parallel applications for certificates of inheritance in various countries.

Which substantive law (of succession) is applicable in the event of international accrual of inheritance (given the absence of precautionary measures while still alive) is a matter that frequently cannot be clearly ascertained, as this question is based on the respective private international law (IPR) of the country concerned.

Example case 1:

A French national has her last place of residence in Germany and leaves behind (just) a substantial bank balance in Germany.

Under German IPR, French law of succession is applicable; from the perspective of French IPR, German law of succession applies.

The reason for this lies in the differing connecting factors used to determine the applicable law in the individual countries. While German IPR is based on nationality as a fundamental rule, French IPR uses the connection of the testator’s last place of residence to determine the applicable law regarding the movable property.

Nevertheless, the question of applicable law is of elementary importance as shown above

Example case 2:

The married couple Hartmut and Anita both have German nationality. They have movable and immovable assets in Germany, Switzerland and Spain. They have their regular place of residence in Switzerland. The married couple have a common daughter with whom they have, however, fallen out, with the result that the married couple have drawn up a joint will (without a notary) in which they disinherit their daughter.

From a German perspective, German law of succession would be applicable in the event of the death of one of the two spouses; from a Swiss perspective, Swiss law of succession would apply. This has far-reaching consequences, as Swiss law fundamentally does not recognise joint wills drawn up “uno acto”, meaning that from a Swiss perspective – not from a German one – the daughter has not been effectively disinherited and could claim her statutory share of the inheritance.

To avoid such collisions between the differing legal systems, it is advisable to concern oneself with this subject during one’s lifetime, and to take corresponding measures if possible.

dirk kolvenbach

Dirk W. Kolvenbach

Heuking Kühn Lüer Wojtek
Succession in Switzerland – Last Will

Succession in Switzerland – Last Will

Succession in Switzerland – Last Will

According to the general provisions of the Swiss International Private Law Act, Swiss courts or administrative authorities at the decedent’s last domicile shall have jurisdiction over probate proceedings and inheritance disputes. The jurisdiction of a state who claims exclusive jurisdiction over real estate within its territory remains reserved. The estate of a person with his or her last domicile in Switzerland will in principle be subject to Swiss law.

Order of succession in Switzerland

The Swiss Civil Code determines the order of succession. The closest heirs of a decedent are the descendants. As a rule, the children shall inherit in equal parts; adoptive children have the legal status of natural children. Their own issue takes the position of predeceased children. In case the decedent does not leave any children, the inheritance shall devolve to the issue of the parents. Their descendants in all degrees per stirpes shall substitute a predeceased mother or father. The surviving spouse or registered partner is legal heir as well.

Swiss law states statutory entitlements for legal heirs (so-called forced heirship portion). Hence, the legal heirs are entitled to a certain percentage of the decedent’s inheritance. This percentage depends on whom the legal heirs have to share with in the estate.

Last will

In order to arrange for a succession different from the intestate succession, a last will or inheritance contract may be drawn up. Nevertheless, a last will, just as an inheritance contract, will have to comply with the statutory entitlements of the legal heirs. According to Swiss law, a last will shall be valid as regards its form if it is drawn up in the form of a public deed or in holographic form.

A foreigner may, be it by last will or inheritance contract, subject his or her estate to the laws of his or her home country (professio iuris). Such disposition shall, however, become null and void if, at the time of death, the decedent was no longer a national of that state or if in the meantime he or she had become a Swiss national.

The Hague Convention on the Conflicts of Laws relating to the Form of Testamentary Dispositions will shall govern the form of a last will. Therefore, a testamentary disposition shall be valid from a formal point of view, if its form complies with the international law (a) of the place where the testator has drawn it up; or (b) of a nationality possessed by the testator, either at the time he made the disposition or at the time of his death; or (c) of a place in which the testator had his domicile either at the time when he made the disposition, or at the time of his death; or (d) of the place in which the testator had his habitual residence either at the time when he made the disposition, or at the time of his death; or (e) as far as immovables are concerned, of the place where they are located.

walter boss.v4.cropped

Walter H. Boss

Walter Boss


How to organise succession?

How to organise succession?

How to organise succession?

Prerequisites: The family members should actively lay the groundwork for the active involvement of the next generation through upbringing and education. By familiarizing the children with the history of the business and talking openly about current developments, parents and elders can reinforce identification with the family business. The children should be actively involved from an early age. This enables the older generation to identify their interest, involvement and commitment.

Preparation phase

At some later point in time the succession planning should become more defined and detailed. The owner of the business should start to establish his objectives. He needs to think about how much control he wants to retain in the future (as shareholder and/or member of the Board of Directors), whether there exist family members capable of and interested in running the business once he steps down, whether he wants to stay on in an advisory capacity etc.. He needs to assess his financial situation, matrimonial and inheritance implications and has to consider tax issues that go along with succession steps. The owner of the business has to communicate and discuss his ideas with the family and start to implement a succession plan (e.g. as part of the family charter or in a separate document).

Implementation phase

Sound basis agreements are the vital building blocks on which seamless and satisfying succession is built on. Drawing up unambiguous agreements is essential (e.g. succession agreement between the owner of the business and his family, organizational regulations for the members of the Board of Directors of the company, shareholder agreement between the shareholders of the company, matrimonial agreement, inheritance agreements or last will).

In a succession arrangement, the principles of the succession plan should be laid down. It should contain provisions regarding:

  1. the family members who may become and remain involved in the running of the business and how the other family members should be compensated.
  2. the time aspect, e.g. staggered transfer of shares to the next generation.
  3. how the transfer of the actual ownership stake should take place, e.g. anticipatory succession, mixed donation or a sale at market price.
  4. how shareholder interests and management responsibilities may be combined.
  5. exit strategies in case the succession plan does not work as intended, e.g. handing back of ownership. Families are well advised to ensure that the ownership of the company does not become too fragmented. Splintering of rights and votes frequently lead to stale mate situations. An effective successor arrangement must be flexible and should include alternatives.

Organizational regulations govern the duties and powers of the Board of Directors, its chairperson as well as of the delegates of the Board of Directors and may contain provisions regarding:

  1. the constitution of the Board of Directors.
  2. the frequency of meetings, the quorum and passing of resolutions.
  3. the inalienable duties and powers of the Board of Directors.
  4. the delegation of the companies management to delegates (e.g. certain family members).
  5. the right to information and reporting duties.
  6. the remuneration of the Board of Directors and its delegates.
  7. signatory rights.
Urs Feller

Urs Feller

Prager Dreifuss