Source: Mr George M. Mangion¸ PKF Malta
As published in the the Malta Today on Wednesday the 17th of July 2013
It is interesting to hear the Minister for economy¸ investment and small business¸ Chris Cardona¸ explain how his government intends to help family businesses as these make up 75% of the local industry¸ employing around 40¸000 workers.
This cohort is even higher than the total amount employed by the State including all its numerous agencies grouped together. What is the worrying about this important cluster of businesses is that succession through generations faces serious difficulties. Dr Cardona advised that it is fundamental that sale of ownership are prepared as early on as possible to ensure the smooth transfer of the family business¸ safeguarding its continuity throughout successive generations.
Under previous administrations there was not enough attention given to the contribution that these firms made over the years in terms of revenue¸ employment¸ contributions to GDP and tax revenues¸ not to mention their support of the communities in which they operate.
Now it time that family businesses are to stand up and be counted.
The new act proposes the development of clear and formal family governance structures¸ family protocols and how the family business is organised and governed plays a pivotal role in this regard. According to Dr Cardona the future ‘Family Business Act’¸ is a bold attempt to offer such firms less bureaucracy and a clear path to facilitate future succession among family members or even outsiders as the case may be.
An important factor in successful succession planning is to have open discussions with the whole family so that everyone can express their wishes for the future and each member’s hopes and aspirations can be aired. For example there is no point leaving the family factory to your son who wants to be a financial adviser in a bank¸ while your daughter is desperate to run the factory production but has never been asked what she wishes to do.
Let us visit the business surveys conducted in UK and try to learn from their conclusions. It is interesting to refer to a report commissioned by the IFB Research Foundation and prepared by Oxford Economics in 2010¸ to provide a comprehensive evaluation of the UK family business sector.
These account for two-thirds of firms in the UK private sector – or two in three of all private sector firms – and are predominantly of small and medium-sized Enterprises.
They provided 9.2 million jobs¸ 40% of total private sector employment¸ or two in five private sector which generated revenues of £1.1 trillion in 2010¸ or 35% of private sector turnover.
Family firms are concentrated most strongly in agriculture and extraction¸ hotels and restaurants¸ and in wholesale and retail. The sectors with the highest absolute number of firms were business servicing real estate and construction.
According to survey data¸ the proportion of SME family businesses in UK¸ that applied for finance