Family businesses and succession: handing over the business without worries

ARROWS attorneys understand that handing over a family business is one of the most important and sensitive milestones in the life of every entrepreneur. For many owners, the company is not just a set of assets, but a life's work, a legacy, and often another member of the family, into which they have invested an enormous amount of time, energy, and sacrifice. This deep personal connection makes the succession process emotionally challenging, a factor that is often underestimated. Unresolved feelings, expectations, and sacrifices from years of building the company can create a kind of “emotional debt” that manifests itself during the transfer of the company as strong resistance to change, intergenerational conflicts, or even resentment.

(on the photo ARROWS team – pictured from left: Jakub Dohnal, Ondřej Stehlík, Richard Sokol, and Jakub Oliva)

Timely and strategic succession planning is essential for maintaining the value, stability, and reputation of your company. The statistics are grim: although nearly two-thirds of Czech family business owners plan to pass their business on to their descendants, only about one-third of companies survive the transition to the second generation, and a mere 12% make it to the third. This alarming decline often stems from poor decisions and inadequate preparation. Without a clear plan, there is a risk of chaos, loss of trust, and even the demise of a family name and reputation built over generations. When family communication is limited to problems and challenges, descendants may perceive the company as a burden full of fear and difficulties, leading to their disinterest or lack of preparation.

At ARROWS, we understand that successful succession requires more than just legal documents. It is a complex process that touches on finances, strategy, but above all, interpersonal relationships and emotions. That is why we focus on a holistic approach that integrates legal, financial, and relationship expertise, often in collaboration with other experts. Our goal is to ensure that your hard-earned business continues to thrive in the hands of the next generation, and that you can enjoy well-deserved peace of mind instead of worry and chaos.

What does ARROWS law firm most often do for companies in the field of family businesses and succession?

ARROWS law firm provides comprehensive services for clients, covering all aspects of the successful transfer of a family business. ARROWS lawyers understand that every family business is unique and requires an individual approach. Thanks to our many years of practical experience and providing services to more than 150 joint-stock companies and 250 limited liability companies, we understand the specific needs of entrepreneurs and company owners. ARROWS lawyers regularly deal with these issues in practice and help clients with a wide range of situations that are key to successful succession.

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Overview of typical situations and areas requested by clients:

• Setting up optimal legal structures for transfer: ARROWS lawyers help clients select and implement the most suitable model for transferring a company. Whether it involves the gratuitous donation of shares, the sale of a company during the founder's lifetime, the use of trust funds to separate ownership from management, or the strategic establishment of a family holding company to centralize assets – always with a view to tax efficiency and the long-term goals of the family.
• Drafting and reviewing contracts and internal guidelines: We ensure that all agreements – from transfer agreements and purchase agreements to detailed shareholder agreements and shareholder agreements – are legally sound, protect the client's interests, and prevent future disputes.
• Preparation and implementation of family constitutions and family governance: We help formalize shared values, visions, and goals of the family, set clear rules for decision-making, profit distribution, dispute resolution, and family member involvement in management. This prevents ambiguities and increases the chances of harmonious cooperation between generations.
• Tax and time optimization of the transfer process: Thanks to cooperation with tax advisors, the tax implications of asset transfers are minimized and the entire process is ensured to run as efficiently as possible in terms of time and costs. The aim is to avoid unexpected tax consequences and maximize value for the family.
• Problem solving and dispute resolution: From interpersonal conflicts and sibling rivalry to disputes between partners or inheritance disputes, ARROWS lawyers are ready to effectively resolve any disagreements, including through mediation, which is a proven tool abroad for preserving family relationships and corporate stability.
• Registry and authority matters: We handle all communication and administration with the commercial register, land registry, and other authorities to ensure that the transfer proceeds smoothly and without unnecessary time loss or complications.
• International succession and asset management: Thanks to the ARROWS International network, which has been built up over ten years, we provide comprehensive legal advice on the transfer of companies and assets with an international element, including complex issues of inheritance law, taxation, and regulation across jurisdictions.
• Contingency plans and unforeseen events: We help prepare scenarios in the event of the sudden inability of the owner to manage the company, including powers of attorney and inheritance plans, to prevent chaos and ensure the continuity of the company's operations even in the most unexpected situations.

ARROWS approaches legal services for family businesses as a strategic partnership. The diversity of services offered, ranging from structuring to dispute resolution, international aspects, and crisis planning, demonstrates that ARROWS does not merely provide ad hoc legal advice. Instead, it focuses on providing comprehensive, long-term strategic support that covers the entire life cycle of family assets and businesses. This approach, supported by long-term client relationships and an extensive portfolio of companies, builds deep trust and ensures peace of mind and continuity for clients' businesses.

(on the photo Vendula Růžková, specialist in family law, ARROWS)

Key legal tools for successful succession:

The 5 most common problems that ARROWS lawyers solve for clients in this area

Transferring a family business is fraught with pitfalls that can jeopardize not only the financial stability of the business, but also family relationships and your legacy. ARROWS lawyers have extensive experience in resolving crisis situations that arise from insufficient preparation or neglect of key aspects. Here are the 5 most common problems they solve for clients in this area:

1. Insufficient communication and unclear expectations: A common problem is a lack of open and timely communication between generations about the future of the company and the roles of successors. Founders often assume that their children are interested, while their descendants may have different visions or feel pressured or even blackmailed into taking over the business. Without clear guidelines and discussion, misunderstandings arise, competing interpretations of the founder's wishes emerge, and ultimately disputes over management and ownership. The result is chaos in management, a loss of trust among family members, paralysis in decision-making, and, in the worst case, the collapse of the company.

2. The founder's unwillingness to relinquish control: For many founders, the company is their “baby” and it is extremely difficult for them to let go of the reins and hand over decision-making powers. This “sticky hand” can hinder the company's development because the new generation cannot fully realize their visions and innovations. This phenomenon, where founders are not ready to leave, is very common and often leads to the company being unable to move forward and develop. The result is slower growth, lost time for successors, frustration among key employees and managers, and ultimately a reputational risk for the company, which is perceived as stagnant or incapable of innovation.

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3. Absence of a formal plan and legal documents: It is alarming that a significant proportion of family businesses in the Czech Republic do not have a formal plan in place for the event that the owner becomes unable to manage the business, including the relevant legal documents. Only 27% of companies are fully prepared, while more than half have a plan but no legal documents, and a quarter have no plan at all. Relying on informal agreements or the assumption that “everyone knows” leads to enormous uncertainty and is one of the biggest mistakes. In the event of a sudden event (death, illness), there is a risk of chaos, lengthy and costly legal disputes over inheritance and ownership, which can lead to the fragmentation of assets, high court fees, and even the heirs ending up with nothing or in debt. This represents a huge lost investment and wasted costs.

4. Complications with an international element: With the globalization of business, many family businesses have assets, operations, or family members in different countries. This brings enormous legal and tax challenges, such as conflicting inheritance laws (e.g., compulsory inheritance shares in some countries vs. freedom of testamentary disposition in others), the risk of double taxation, and different regulatory requirements for the ownership and management of digital assets. Without expert international advice, there is a risk of transfers being invalidated, high fines for non-compliance with local regulations, significant tax burdens, and protracted international disputes.

5. Lack of or insufficient preparation of the successor: It is sometimes assumed that the successor will “simply take over” the company without being systematically prepared for the managerial, strategic, and emotional challenges. Insufficient experience, lack of know-how, or lack of interest on the part of the successor can result in their inability to run the company effectively. This will lead to chaos in operations, a loss of trust among employees and partners in the new management, and ultimately to a reduction in the value of the company or even its demise. These problems are not isolated; they are often interconnected and create a cascading effect. For example, insufficient communication can lead to misconceptions about the right candidate, resulting in inadequate preparation of the successor. All this, combined with the founder's unwillingness to relinquish control, creates ideal conditions for informal planning and subsequent disputes.

(on the photo Ondřej Stehlík, specialist in family business law, ARROWS)

Comparison of risks in the event of failed succession

How ARROWS ensures a smooth transfer: Practical examples and expert insights

ARROWS lawyers regularly deal with these issues in practice and know that the key to a successful transfer is a combination of a precise legal strategy, a deep understanding of family dynamics, and proactive problem solving.

Our experience in providing long-term services to our clients allows us to offer solutions that go beyond mere legal advice.

Client stories and real-life scenarios:

• Scenario 1: Transfer without a suitable successor and sale of the company: ARROWS lawyers know from experience that there is not always a suitable or motivated successor within the family. In such cases, we help owners strategically prepare the company for sale to an external investor or business partner. We recently successfully secured the sale of a major e-commerce company with a turnover of CZK 150 million. We conducted a complete legal, tax, and accounting review and negotiated terms that exceeded the seller's original expectations. In doing so, we ensured that our client's life's work was not wasted, but appreciated and handed over to someone who will ensure its further development. This approach requires not only knowledge of M&A transactions, but also a sensitive understanding of the emotions of the founder who is giving up their “baby.”
• Scenario 2: Comprehensive restructuring and international dimension: ARROWS Law Firm has experience with family businesses that often operate internationally. For example, we handled a case for a client who needed to restructure the ownership structure of their family business with assets in several European countries. Thanks to our ten-year-old ARROWS International network, we were able to harmonize different legal systems, tax implications, and regulatory requirements relating to inheritance law (e.g., compulsory inheritance shares vs. freedom of testamentary disposition), asset management, and tax obligations. International succession is extremely complex due to jurisdictional differences, the risk of double taxation, and the need to ensure compliance with local regulations. Our lawyers are insiders in this field and can effectively coordinate legal steps across continents, eliminating the risk of penalties and loss of trust in international business.
• Scenario 3: Resolving internal family disputes through mediation: ARROWS lawyers know that family disputes can destabilize a company much more than ordinary business problems. We often encounter sibling rivalry or differing visions among successors. In one case where a prosperous company was threatened with collapse due to disagreements between two brothers over future strategy, we proposed and facilitated mediation. Thanks to an impartial mediator bound by confidentiality, we were able to open up sensitive issues and find a solution that satisfied both parties and saved the company. Mediation is a common and proven tool abroad that significantly increases the chances of a smooth transition. In our country, its potential is still underappreciated. Our experience shows that investing in conflict prevention and early resolution pays off many times over—the family emerges from the process stronger, not divided.

The use of modern technologies and artificial intelligence at ARROWS:

At ARROWS, we keep up with the times and use the latest tools, including artificial intelligence, to work more efficiently and accurately. AI helps us automate legal research, analyze large amounts of data and documents, and even draft initial contracts, allowing us to focus on comprehensive strategy and personalized advice. This means that ARROWS lawyers can get more work done in the same amount of time and provide clients with even better and faster services. Of course, we carefully verify all information generated by AI, because the human factor, experience, and intuition are irreplaceable in law. This combination of practical expertise, international reach, and technological innovation sets ARROWS apart from the competition and builds strong trust with clients seeking modern and effective solutions.

Don't leave the future of your business to chance: Contact ARROWS today

Handing over a family business is an investment in the future, not just a necessary evil. With ARROWS lawyers, you can rest assured that your life's work is safe and your legacy will continue. We will help you avoid fines, disputes, lost time, and reputational risk that threaten unplanned succession. Remember that postponing planning is one of the most common and costly mistakes that can lead to chaos and the demise of a company.

Don't be caught off guard by unforeseen events or family disputes. Start planning early and ensure a smooth and successful transition of your business. ARROWS lawyers are ready to offer you an initial consultation to discuss your specific needs and propose a tailor-made solution. Contact ARROWS Law Firm today and take the first step toward ensuring the stability and prosperity of your family business for generations to come. We are here to help you with comprehensive services under one roof.

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Read our articles:

• 7. 4. 2025 - Intergenerational handover of the family business:Legal options, risks and recommendations
• 14. 3. 2025 - Family businesses and succession: handing over the business without worries
• 14. 2. 2025 - The Family Constitution The key to preserving family property for future generations

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