Inheritance law revision for business succession
In its dispatch of June 10, 2022, the Federal Council submitted to Parliament its bill to amend the Swiss Civil Code with the aim of facilitating succession within the family. This is because the transfer of ownership of a company under inheritance law currently raises numerous problems that can be associated with negative consequences for the company, but also for the labor market and the national economy in general.
The initial situation
If the deceased owner of a company has several heirs with claims to a compulsory portion, the transfer of ownership of the company quickly gives rise to the risk of a conflict with inheritance rights and legal claims. This is particularly the case if the company accounts for a large share of the testator's total assets, as is often the case with SMEs. In such a case, the transfer may be significantly impeded or even made impossible due to currently applicable inheritance law provisions. This in turn can lead to the company having to be dissolved and liquidated.
The solution approach
With this dispatch, the Federal Council now wants to facilitate the succession of companies under inheritance law by creating specific civil law provisions. Specifically, it proposes three measures:
A right to integral assignment of a business in the course of the division of an estate if the testator has not made a disposition to this effect.
The possibility for the business successor to obtain a deferral of payments from the other heirs.
Specific rules for the value to impute the business among the heirs.
It should now be possible to set off the value of companies taking into account the entrepreneurial risk. In other words, it should be possible to credit a company at its value at the time of the donation - and not only at the time of the inheritance. In this way, the other heirs who do not take over the company would participate neither in an increase nor in a decrease in the value of the company.
What should you do?
Anyone wishing to invoke this innovation must have a business valuation prepared at the time of the bequest of the business and hand it over to the competent authority within one year together with the underlying supporting documents. To protect the rights of the other heirs, this transfer is irrevocable.
Context of the revision of the law
Anyone wishing to reserve the right to offset the company at the value at the time of the grant should, as a precaution, have the necessary company valuation carried out promptly. When the measures come into force, the valuation can still be submitted during the year in which they come into force. We recommend that you already check now whether a company valuation is to be arranged. This can also be done "as a precaution", so that you can then refer back to this valuation later after it has come into force. We would be pleased to advise you in this regard in order to be prepared for the revision of the law, but also in all other questions of business succession and structuring of a business for the case of inheritance.
When can we expect the revision?
The Committee for Legal Affairs of the Council of States addressed the bill at its meeting on November 4, 2022 and issued several mandates to the administration. On January 27, 2023, it took note of the administration's explanations and asked it to work on some questions further. The Committee for Legal Affairs of the Council of States will continue its work on the inheritance law revision bill on business succession at one of its next meetings with detailed deliberations.
It can be assumed that the formulation of the new institutes to be created proposed by the Federal Council will be the subject of controversy in the political discussion and will still undergo significant changes. Anyone wishing to reserve the right to offset the value of the company at the time of the donation should, as a precaution, have the necessary company valuation carried out promptly. This can then still be submitted to the competent authority for a period of one year, should the innovations of the third measure come into force.
If you have any questions about business succession, please feel free to contact Cheyenne Durrer.