Don't Leave Succession Planning Too Late, Warns Family Business Office Regulator

Marie-Claire Grima - 9th June 2018

“Although most of the businesses in Malta are family-owned, the majority of them fail to set a suitable plan to transfer the business when the time comes," says Dr Nadine Lia.

The greatest advantage of a family business is the sense of value that its family members and employees tend to have, according to Nadine Lia, the regulator for the Family Business Office. “They value and cherish the business. They respect the legacy that their forefathers left for them, and they have certain expectations that they should excel. So when they sit down through a difficult period, they’re more likely to accept tightening the belt, and take the necessary measures. Also, there’s an instinctive passion for their work. For them, it’s not just a nine-to-five job; it’s a lifestyle.”

Naturally, there are downsides to working with some of your closest relatives. “When you have a family business, you are mixing the emotional with the practical, because at the end of the day, you may have to go home and live with your employees! It’s not necessarily a disadvantage, but it can be a difficulty if it’s mismanaged. Additionally, when you’re working with family members, you may not have certain external expertise – you may lack good governance, or not have effective management. You could be excellent at what you’re doing, but not doing the best at managing it.”

The Family Business Office was opened in March 2017, after the Family Business Act passed into law on the 1st January 2017, as a result of a need and a lack of assistance in this particular sector of the economy. “There’s long been a call for policy makers to give focus and give assistance to family businesses, and this had also been expressed by the European Commission,” says Dr Lia. “Malta has taken the initiative to be the first country to assist family businesses, in this respect. Our aim is to help family businesses in their growth, as well as their crucial transfer stage. The reality is that although most of the businesses in Malta are family-owned, the majority of them fail to set a suitable plan to transfer the family business when the time comes. Our aim is to help them bridge that difficulty and ensure that we do not have those pitfalls coming up over the next decade.”

There are a number of incentives for family businesses which have been recognised as such, and most of them fall under three categories – fiscal, tax credits or governance. “All of these incentives have been designed to provide help throughout every stage of the family business, whether it’s in the operational part, the planning ahead, or the transfer. Take-up has been good, with around 200 companies signing up for the incentives introduced by the Act, and another 50 waiting for approval.”

Most family businesses in Malta are small-to-medium enterprises (SMEs), employing between five and 20 people, Dr Lia says, but there are no boundaries on who can make use of the Family Business Office’s services. “We work with everyone from the largest to the smallest businesses, as well as firms which don’t actually fall under the category of family businesses, but still work with their family members. We take an open approach because we know that a business restructures itself as it goes along; in terms of size, there’s no distinction.”

Many of the pitfalls that family businesses commonly tend to stumble into concern governance and succession planning. “Through the Family Business Office, we aim to provide assistance and help, and incentivise family businesses which look into these elements to make sure everything is in order. At the same time, a lot of them have fiscal and financial difficulties, so we’re hoping to give them a motive to address that situation, and have a central guiding door to knock on.”

Communication is key to overcoming some of the thorniest issues these businesses face. “Some people that we talk to think that because they work with their parents or children every day, they don’t have to communicate clearly what they want. They’ll say things like “Look, my parents know I’m unhappy,” but those are just the non-verbals that you take for granted because you’re related. In reality, in a non-family business, you’d go to HR or speak to your boss, and say, “Listen, I’m thinking of moving on,” or “I need different resources to what I have so far.” Communication in a family business can be quite sensitive, but the more you do it, the better it is.”

The Family Business Office has been open for just over a year, but Dr Lia says that its biggest impact has been increased awareness among the businesses who sought out its services which are free. “A lot of family businesses work in isolation, unaware of what other family businesses do, and not knowing how to handle their own difficulties. They just take it as something for granted that this is their situation, their problem, and theirs alone. Through the Family Business Office, we have created a lot of awareness – it’s like we’ve lifted the lid, and shown businesses, this is how other families work, this is how you could consider working, this is what you could do to better your situation, and so on. In our feedback, we get many businesses telling us that this is exactly their situation, but they’ve just never known how to go about it, because they’ve never had a reference point.”

Dr Lia warns businesses not to leave the planning for when it’s too late. “You can never plan the future of your business early enough, and it is the responsibility of the owner to ensure that he or she does the job and doesn’t avoid it. Unfortunately, the question of how to manage and run the business can end up being the elephant in the room – the issue of who’s going to take over rears its head, children become frustrated employees, cousins come into the picture, the company’s founder reaches his or her 80s and is still there, so it becomes this whole, uncomfortable silence. You need to plan and you need to communicate – continually – with family members, employees, and advisers. Look at your best options – you have to know who’s interested, who’s capable, and who’s confident enough to take over when the time comes.”

For more information about the Family Business Office and its upcoming events, visit or FB: FamilyBusinessOfficeMalta

This article originally appeared in The Malta Business Observer

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