• 2023.04.18
  • M&A

Cases of using reorganization acts under the Companies Act as a method of business succession

Establishment of a holding company through a share exchange

As a prerequisite for business succession, a holding company can be established and the founder’s eldest son can be given as many shares of the holding company as possible. The establishment of a holding company can be done by means of a share exchange as stipulated in the Companies Act. Through a share exchange, the operating company becomes a wholly owned subsidiary of the holding company, and the shareholders of the operating company become shareholders of the holding company. Subsequently, by making all group companies wholly-owned subsidiaries of the holding company, it became possible to exercise general control over the group companies, and the creation of multiple subsidiaries also led to a reduction in the share price (assessed value for inheritance tax purposes) of the holding company.

Establishment of a sibling company through a company split

Company X is a manufacturer with sales of several tens of billions of yen, and has an eldest son and a second son as potential successors. Since both sons are highly competent and have excellent children in their respective families, the company was at a loss to decide whether to select the eldest or the second son as the successor. In addition, the eldest and second sons are also conscious of each other, which hinders their spontaneous activities. Therefore, the father, the founder of the company, decided to separate the sales division into a separate company by means of a company split. The manufacturing company was then taken over by the eldest son, while the sales company was taken over by the second son. It is often the case that a manufacturing company and a sales company are separated as a method of business succession, and the first son and second son succeed to the manufacturing company and the sales company, respectively.

A case in which the eldest daughter, eldest son, and second son each inherited one-third of the shares

Since the founder of Company K did not take any inheritance measures before his death, upon his death, his three children, his eldest daughter, eldest son, and second son, each inherited one-third of the outstanding shares. Even if the three children were to manage the company together, the founder would have had to make a policy regarding who would be the president. In addition, the family members who would become president would need to acquire enough shares to ensure as much stable management as possible.