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In the Spanish legal and economic context, family businesses play an essential role. It is estimated that more than 85% of the business fabric in Spain is family-owned, accounting for a significant portion of employment and national GDP. However, many of these companies do not survive beyond the second generation. One of the main reasons is the lack of succession planning, which generates conflicts, unnecessary tax burdens, and problems in business management.
In this scenario, a will is a fundamental legal instrument, not only to guarantee the orderly transfer of assets, but also to ensure business continuity, protect the legacy, and maintain family cohesion.
1. Risks of not making a will: intestate succession and lack of asset protection
1.1 Intestate succession: mandatory rules and lack of control
Article 658 of the Civil Code establishes that succession may occur by will (testate succession) or, failing that, by law (intestate succession).
When the entrepreneur does not make a will, the latter modality is activated, as set out in Articles 930 to 958 of the Civil Code, which determines the order of succession to the inheritance (descendants, ascendants, spouse, collateral relatives, etc.).
This means that the entrepreneur loses the ability to decide who receives their assets, how they are distributed, and under what conditions. It is not possible to:
- Favor one heir over another (except for improvements permitted by law).
- Protect those considered most suitable to continue the business.
- Exclude heirs who could jeopardize the stability of the business.
1.2 Fragmentation of assets and conflicts between heirs
In intestate succession, all heirs named by law receive their share according to legal percentages. This situation often leads to the fragmentation of the company's share capital among several people who, in many cases, have no business training or interest.
This can lead to:
- Blockages in corporate decision-making.
- Family conflicts that end up in court.
- Forced sale or liquidation of the business due to disagreement between co-owners.
In addition, if any of the heirs are minors or have a disability, there is a need for judicial intervention for acts of administration or disposal, which slows down or paralyzes the operation of the company.
2. Tax risks: loss of benefits due to lack of planning
When there is no will to plan this succession, it is common to lose the possibility of applying the exemptions provided for by law. The result is a higher tax burden that may force heirs to sell assets or parts of the business to pay the tax.
3. Business risks: impact on continuity and reputation
3.1 Paralysis of business activity
The death of a business owner without a will can lead to a period of legal uncertainty in which it is unclear who has decision-making authority, who can represent the company, or whether legal proceedings must be awaited to distribute the inheritance.
This vacuum directly affects:
- Strategic management.
- The signing of key contracts.
- Relationships with banks, suppliers, and customers.
The lack of leadership can lead to a loss of confidence on the part of third parties, compromising the viability of the business.
3.2 Loss of corporate control and entry of unwanted heirs
The company may end up in the hands of people with no business knowledge or interest in the business. In the worst case scenario, one of the heirs may want to sell their share to third parties, upsetting the family and corporate balance
4. Key testamentary clauses for family entrepreneurs
To avoid the above problems, entrepreneurs should draw up a will containing certain key clauses, in accordance with the rules on legitimate inheritance (Articles 806 to 822 of the Civil Code), such as:
4.1 Appointment of a specific heir or legatee
It is essential to designate the person who is to receive the business or shares. This can be done by means of a legacy (Articles 858 et seq. of the Civil Code) or preferential attribution in accordance with Article 1056 of the Civil Code, which allows the business to be awarded to one or more heirs with financial compensation to the others.
4.2 Improvement clauses
Improvement (Article 823 CC) allows one of the descendants to be favored by allocating them part of the inheritance in addition to their strict legitimate portion. This is useful for strengthening the successor to the business, giving them greater financial weight and decision-making power.
4.3 Clauses to prevent business fragmentation
Provisions may be included that prohibit the division of shares, condition their transfer to family members, or prevent their sale to non-family third parties. All of this must be coordinated with the articles of association if the company is a corporation.
5. Minor heirs: legal provisions and the need for special protection
5.1 Exercise of rights by representation
Minors do not have the legal capacity to exercise political or management rights. These rights are exercised by their legal representatives:
- Parents with parental authority (Articles 154 et seq. of the Civil Code).
- A legal representative, if the parents are deceased or disabled (Articles 222 to 285 of the Civil Code).
5.2 Judicial authorization
As these are acts that affect the minor's assets, such as the sale of shares, the law requires judicial authorization (Art. 166 CC), which can slow down key business decisions.
5.3 Appointment of a special administrator
To avoid interference in management, the testator may appoint a special administrator, other than the parents or guardians, to be exclusively responsible for the minor's business shares (Art. 164 CC).
5.4 Executor and partitioner
- The executor (arts. 892-911 CC) is responsible for carrying out the testator's wishes. This is useful for managing the transition without relying solely on the heirs.
- The partitioner (art. 1057 CC) facilitates the partition of the estate in accordance with the will, avoiding deadlocks resulting from a lack of agreement among the heirs.
6. Coordination of the will with the family protocol
6.1 Importance of the family protocol
The family protocol is a private agreement between members of a business family that regulates how the business is managed and transferred. Although it does not have the same legal force as a will, it is essential for:
- Establishing clear rules of governance.
- Regulating the incorporation of new family partners.
- Establishing conflict resolution mechanisms.
6.2 Risks of contradiction
If the will contradicts the protocol, legal conflicts and disputes between heirs may arise. Therefore, both documents must be coordinated and reviewed periodically.
6.3 Benefits of coordination
- Avoids disputes and legal deadlocks.
- Reinforces the entrepreneur's wishes.
- Facilitates business continuity.
- Allows for better tax planning.
- Adapts to changes in the family and the business.
Conclusions
Family business owners should not put off writing their will. Granting it with legal advice and coordination with other documents such as the family protocol:
- Avoids legal, tax, and business risks.
- Ensures business continuity.
- Protects the estate
In short, a will is a key legal tool for the continuity and security of the business estate, which every family business owner should draw up. Our team of professionals can help you manage it. Contact them here.
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More information on Family Business
Susana Perales – Family Business Group
Director in the litigation and arbitration area
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