Matthew Zampa / LinkedIn

Zampa Debattista Co-Founding Partner Matthew Zampa has stressed the need for family businesses to carefully map out and formulate a succession plan to ensure business continuity.

His comments came during a panel discussion as part of the Family Business Forum, an event co-hosted by Ganado Advocates and Zampa Debattista last week. The forum brought together various professionals and governance specialists to discuss different perspectives on how important strong governance is when it comes to establishing value for family businesses.

One of the panels, moderated by Ganado Advocates Senior Associate Christina Scicluna, featured Mr Zampa, AX Real Estate CEO Denise Xuereb, and Ganado Advocates Partner Simon Schembri. It focused on the need for succession plans and how businesses can work towards continuity.

Dr Scicluna started off the discussion by asking Mr Zampa what succession planning really is, and why some people tend to put the concept “on a backburner”.

Family Business Forum / Rene Rossignaud
From left: Ganado Advocates Senior Associate Christina Scicluna, Zampa Debattista Co-Founding Partner Matthew Zampa, AX Real Estate CEO Denise Xuereb, and Ganado Advocates Partner Simon Schembri during the discussion / Rene Rossignaud

He replied that “succession is about the future” and about “looking at things in the long term”.

“Having a succession plan will increase the chances of having long-term sustainability. Succession planning’s scope is to ensure a smooth transition from one generation to another,” he explained.

Mr Zampa highlighted that it is vital for businesses to identify the people who can succeed the existing leaders, and the roles that need to be fulfilled, as through this way, they can “set the structure of the future”.

“One has to ask whether these people are competent enough. Unless these people have the right competence, leaders should be looking outside the organisation to see if external people can ensure the long-term viability of the business,” he said.

Additionally, existing leaders must have the “right mindset” to enable leaders to join the business. This is something that many businesses, especially those which are family-owned, tend to struggle with.

“Business leaders cannot expect new leaders to carry out things in exactly the same manner, as if this is the case, then it could be detrimental to the organisation,” Mr Zampa said.

This makes a well-defined succession plan crucial for the longevity of the business, and also to ensure that the goals and values that it was founded with are retained or developed further, ensuring the business remains true to what it stands for.

However, there is still a significant portion of local family businesses that do not write down their succession plan, or do not have one in place altogether. Marthese Portelli, CEO of the Malta Chamber of Commerce, Enterprise and Industry, highlighted this earlier in the conference, referring to a survey which found that 65 per cent of family businesses do not have a succession plan.

“A succession plan isn’t something which is abstract. It needs to be put down on paper and shared with the relevant people of the organisation and revised on an annual basis. A succession plan is about business continuity,” Mr Zampa remarked.

When asked what family businesses can do to ensure that the vision and strategy are passed from one generation to another, he emphasised the importance of creating a family charter.

A family charter is a document that is used in order to record agreements made between family members, particularly in terms of how a family business should be run. While these are not legally binding, they can be useful in clarifying a number of key and possibly sensitive issues that such businesses must deal with.

The document should include the vision, mission, culture, and ethics of the family business, as well as the manner in which decisions are taken.

Simon Schembri / Ganado
Ganado Advocates Partner Simon Schembri / Ganado Advocates

“It provides more clarity, and so would definitely reduce the conflict between the parties, and at the same time, ensure the family legacy remains,” Mr Zampa said.

Following this, Dr Schembri emphasised that having initial discussions with families is “not an easy task”, and “no business is the same”.

“What you first need to identify is the nature of the business and the nature of its members. First, familiarise yourself with the older generation, and then the younger generation,” he added.

The corporate service provider must identify the children heavily involved in the business, as there can be some that are “leading a separate career altogether”.

“Also, one needs to understand the dynamics that each of the relationships the children have. At times, it goes beyond legal advisory. You need to have these uncomfortable discussions with them. I’ve seen a number of cases where businesses who do fail or unfortunately end up in lawsuits have a number of siblings not speaking to each other, for the simple reason that their better half ends up involved in the running of the business,” Dr Schembri said.

“The reality is that you need to segregate your assets from your partner. It is important that there’s no interference from third parties,” he added.

He remarked that there are a number of mechanisms that family members can use to facilitate this, yet “not everyone accepts” as it is ultimately up to them to do so.

Denise Xuereb
AX Real Estate CEO Denise Xuereb

Ms Xuereb, who has been involved in AX Group, a family business, for various years, emphasised that succession planning is a plan, yet it is also a “process”.

“You have to give the younger generation the benefit of the doubt. Take a step back, and let the younger generation fit in wherever life takes them,” she said.

“It’s not always easy, as you’d want your children to continue that legacy, but I, for one, would also be proud if they chose against continuing in the business,” Ms Xuereb continued.

Dr Schembri noted that succession planning has to start from an early stage, as it is something that takes time.

“Businesses need to take this from an objective perspective and identify from early as possible the potential pitfalls. Start early,” he remarked.

Rounding off the panel, Mr Zampa said that a successful family business must be run on the pillars of corporate governance, a written succession plan, and a family charter.

Featured Image:

Zampa Debattista Co-Founding Partner Matthew Zampa / LinkedIn

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