For the transfer of shares in a company between family members, owners need to consider several important aspects:
This article is of interest to you if…
- You want to transfer shares in the family in compliance with the law.
- You are looking to optimise taxes and take advantage of exemptions.
- You want to avoid family conflicts with a fair valuation.
- You plan the succession of your family business.
- You need to know the key documentation to formalise the process.
Legal aspects
Transferring shares in a company between family members requires compliance with a number of specific legal requirements. These requirements are essential to ensure that the transaction is valid and that future legal problems are avoided.
Respect the company’s articles of association and any existing shareholders’ agreements.
Before any transfer of shares, it is essential to review the company’s articles of association and check whether there are any shareholders‘ or partners’ agreements governing share transfers between family members.
Such agreements may provide for specific limitations or conditions for transfers, such as pre-emptive rights for other members or shareholders, which must be respected in order for the transfer to be valid.
Formalising the transfer by public deed before a notary public
The transfer of shares or stocks between family members must be carried out through a public deed before a notary. This step not only gives legal validity to the transaction, but also provides an official document that can be presented to third parties, such as financial institutions or the tax office, if necessary.
Enter the change of ownership in the company’s register of shareholders or registered shares.
Once the public deed has been executed, it is essential to register the change of ownership in the company’s register of shareholders or registered shares. This book is the official document that records the ownership of the shares and the identity of the shareholders, and it must be updated so that the new owner of the shares has full rights over them.
In addition, this step ensures that the company has a clear record of its owners and avoids potential conflicts or confusion in the future.
Tax considerations
The transfer of shares between family members involves not only legal aspects, but also a number of tax implications that can significantly affect the cost of the transaction.
95% reduction in Inheritance and Gift Tax for gifts between parents and children
As a gift, a 95% reduction in inheritance and gift tax may apply, provided certain requirements are met. This benefit is designed to facilitate the transfer of family assets, especially in the context of family businesses, and considerably reduces the tax burden for the recipients of the shares. However, it is crucial to comply with the conditions established by the regulations in order to qualify for this reduction.
Transfer tax on transfers (sale and purchase)
When the transfer of shares is carried out as a sale and purchase between family members (i.e. a transfer for valuable consideration), such a transaction is subject to Transfer Tax (ITP). However, by virtue of Article 45.I.B) 9 of the ITPAJD Law, transfers of shares in unlisted companies may be exempt from this tax under certain circumstances. This exemption is intended to prevent the tax burden from hindering transactions in the area of family businesses, provided that specific requirements are met.
Application of tax benefits for family businesses
There are other specific tax benefits for family businesses that can be applied in the transfer of shares between family members. These benefits include tax base reductions and other inheritance and gift tax advantages designed to facilitate the continuity of the business within the family.
It is important to carry out a thorough analysis of the tax situation of the company and of the particular transfer, as these benefits only apply under certain conditions and can lead to significant tax savings for those involved.
As the tax framework can be complex and exemptions and reductions have specific requirements, specialised tax advice is recommended. A professional will be able to assess the specific situation of the transfer and optimise the applicable tax benefits, ensuring compliance and minimising the associated tax costs.
Assessment of actions
The valuation of the shares is a crucial step in the inter-family transfer process, as it allows establishing an objective and transparent value for the transaction. A proper valuation is particularly important for:
Determining a fair price in case of sale and purchase
In the case of a transfer for valuable consideration (sale and purchase), the valuation of the shares ensures that the agreed price is fair and reflects the real value of the company. This step helps to protect the interests of both parties, preventing the buyer from overpaying or the seller from receiving less than the shares are actually worth.
Calculating the tax base for donations
In the case of a donation, the valuation of the shares is essential for calculating the taxable base for Inheritance and Gift Tax. An objective value makes it possible to correctly determine the tax payable and facilitates compliance with tax obligations, reducing the risk of problems with the Tax Agency.
Avoiding future conflicts between family members
Objective valuation helps to prevent conflicts that may arise in the future, especially in the family environment. By establishing a fair and transparent value for the shares, it prevents the parties from feeling that the transaction was unfair or disadvantageous, which helps to maintain a good relationship between family members and to protect harmony within the company.
To carry out this valuation, it is advisable to call in an independent expert who can apply recognised valuation methods adapted to the type of company, thus guaranteeing the impartiality and objectivity of the process.
Succession planning
The transfer of shares between family members is not always a one-off transaction; in many cases, it may be part of a broader succession plan aimed at ensuring the continuity of the business within the family. For effective succession planning, several key aspects must be considered:
Creation of a family protocol
A family protocol is a document that sets out the rules and guidelines for the succession and management of the company within the family. This protocol can address issues such as the rights and obligations of each member, the criteria for holding positions of responsibility and the procedures for the transfer of shares. Having a family protocol in place facilitates an orderly transition and reduces the likelihood of conflict during the succession process.
Assessment of options such as usufruct or bare ownership
In some cases, it may be desirable to divide the ownership of the shares into usufruct and bare ownership. This means that one person (the usufructuary) retains the right to receive the benefits (such as dividends) of the shares, while another (the bare owner) retains formal ownership of the shares. This option is particularly useful in succession plans that seek to maintain operational control in one generation while transferring ownership to the next.
Transition planning in business management
Management succession is a key aspect of any succession plan. In addition to transferring shares, it is essential to plan for the transition of leadership and management roles in the company. This includes identifying successors, defining their responsibilities and ensuring that they have the necessary training and experience to take over management. Proper succession planning ensures that the company is prepared for the transition without affecting its performance and stability.
Incorporating these elements into the planning of the transfer of shares between family members not only facilitates a smoother transition, but also contributes to the continuity and sustainability of the family business in the long term.
Necessary documentation
In order to carry out the transfer of shares between family members in a formal and legally compliant manner, it is essential to collect and submit a number of documents. These are the main documents required:
Public deed of transfer
By means of a public deed before a notary, which provides legal validity to the operation and serves as official proof of the transaction.
Certificates from the Commercial Register
Issued by the Mercantile Registry, certifying the existence of the company and the ownership of the shares to be transferred. These documents guarantee that the process is carried out in accordance with current regulations.
Tax documentation (tax assessment)
Depending on whether the transfer is made by donation or purchase, the corresponding tax documentation must be submitted. This includes the settlement of the inheritance and gift tax or transfer tax, as applicable.
Updating the register of members
Once the transfer has taken place, the change of ownership must be recorded in the company’s register of shareholders. This register is the official document that records the ownership of the shares and allows the new owner to be recognised as a full shareholder.
Specialised legal and tax advice is highly recommended during this process to structure the share transfer properly, ensure compliance with applicable regulations and optimise the tax implications of the transaction. A professional can guide both parties at every stage, helping to avoid mistakes that could have legal or tax consequences.
Frequently asked questions
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Is it compulsory to transfer shares between family members by means of a public deed?Yes, the transfer of shares must be formalised in a public deed before a notary in order to be legally valid and recognised by third parties.
- What tax benefits apply to gifts of shares between parents and children?In the case of gifts of shares between parents and children, a 95% reduction in inheritance and gift tax can be applied, provided certain requirements are met.
- How is the share price valued in a sale and purchase between family members?It is advisable to have an objective valuation of the shares, ideally by an independent professional, to determine a fair price and avoid future conflicts.
- What is the tax applicable to a sale of shares between family members?The purchase and sale of shares is subject to Transfer Tax (ITP), although it may be exempt from payment according to Article 45.I.B) 9 of the ITPAJD Law.
- Is it necessary to update the register of members after the transfer of shares?Yes, the change of ownership must be recorded in the register of members in order for the new owner to have full rights to the shares.
- What is a family protocol and how does it help in the transfer of shares?A family protocol is a document that sets out the rules of succession and management within the family business. It facilitates an orderly transition and reduces potential conflicts in the share transfer process.
- What does the transfer of shares with usufruct or bare ownership involve?This method allows the ownership of shares to be divided: one person (usufructuary) receives the benefits, while another (bare owner) retains ownership. It is useful in succession planning to maintain control in one generation and transfer ownership to the next.
