Family business succession: successfully passing the torch

Family businesses represent the backbone of the French economy. With 71% of French companies family-owned, contributing 65% of GDP and generating 69% of employment, these structures constitute an essential economic heritage. Yet a major challenge looms on the horizon: in the next ten years, half of these family businesses will need to be transmitted, an issue directly affecting the sustainability of our entrepreneurial fabric and employment in our regions.

Transmitting a family business is not simply a notarial act or financial transaction. It engages a long-term strategic vision, delicate family balances, structural governance choices, and significant emotional burden for all stakeholders. Statistics reveal that 25% of family SME and mid-cap company leaders are over 60, but 47% of those aged 60-69 and 36% of those over 70 have still not formalized a succession plan. This lack of anticipation jeopardizes decades of work and risks losing unique expertise.

Faced with this reality, succeeding in family succession requires meticulous preparation that begins well before the actual handover. Between tax mechanisms like the Dutreil pact, structuring family governance, managing potential conflicts between heirs, and psychological preparation of the seller, the dimensions to master are multiple. This guide accompanies you through the five fundamental pillars of successful family succession, based on the most recent data and sector best practices.

Understanding the specific challenges of family succession

Family business succession presents unique characteristics that fundamentally distinguish it from a sale to an external third party. According to the first Family Business Succession Barometer published in October 2025 by EY and OpinionWay, 92% of family business leaders wish to transmit their company, and among them, 83% favor intrafamily transmission. This strong preference is explained by the desire to sustain the company and its values, mentioned by 80% of transmitters, and to pass on family heritage, an objective shared by 46% of them. Family succession also maintains the company's territorial roots and preserves local jobs, values deeply embedded in the DNA of French family businesses.

Yet this succession raises considerable emotional challenges that sellers to external third parties do not encounter. For the outgoing leader, transmitting the company to which they devoted their life is often experienced as a symbolic disappearance. The mourning of power, status, and an identity based on the company generates very strong emotional burden that requires real courage to overcome. Barometer figures reveal that 54% of transmitters fear bequeathing a burden to their children, while 40% of successors dread that their predecessor will have difficulty letting go. These mutual apprehensions, if not anticipated and managed, can compromise succession success and create lasting family tensions.

The intergenerational dimension adds additional complexity to the process. Vision differences between generations on the definition of success, company objectives, or management methods can generate misunderstandings. Yet 36% of transmitting leaders state they transmitted precisely so the company would be more connected to market challenges through new generations' contributions. This generational complementarity, when well orchestrated, constitutes a formidable transformation lever. Data shows that 88% of successors believe their company is more sustainable after transmission, and 63% observe economic and strategic development following the handover. Family succession, far from being simple maintenance of the status quo, therefore represents a genuine entrepreneurial renewal opportunity.

Anticipating and preparing succession from age 50

Anticipation constitutes the determining factor of successful family succession. Experts agree on an unequivocal observation: it takes between 7 and 10 years, sometimes more, to ensure successful family business handover. This incompressible duration is explained by the need to psychologically prepare all stakeholders, legally and fiscally structure the operation, progressively train the successor, and secure the transition with clients, suppliers, and employees. Yet in France, 75% of family business leaders have not yet initiated their transmission process, a situation that jeopardizes thousands of companies' continuity. This lack of preparation often stems from aging denial, difficulty projecting into post-sale life, or simply lack of information about steps to follow.

The first anticipation step consists of objectively assessing the family situation and identifying potential succession candidates. This exploration phase requires frank conversations with all children, whether they already work in the company or not. According to PWC's Global NextGen Survey, 70% of heirs say they are deeply attached to the family business, 41% aspire to have leadership functions there, and one-third want to become majority shareholders. These figures demonstrate that a pool of potential successors often exists within the family itself, but 48% of them say they are hindered and frustrated by lack of opportunities. It is therefore the leader's responsibility to open dialogue early enough to allow candidates to come forward and prepare, while respecting those who do not wish to engage in this path.

Successor preparation constitutes the other essential facet of anticipation. A family successor must acquire several types of skills before taking the company reins. First, external professional experience generally proves beneficial for developing credibility, broadening vision, and avoiding nepotism accusations from teams. Next, a gradual integration period in the family business, ideally several years, allows the future leader to understand activity specifics, build relationships with stakeholders, and gain employee confidence. In parallel, specific training in management, governance, business strategy, and sustainable development complete this preparation. New generations must also understand their respective roles and positions, each child ideally having a clear mission to focus on, whether operational, governance-related, or connected to family wealth management.

Optimizing taxation through the Dutreil pact

The Dutreil pact remains in 2025 the most powerful tax tool for facilitating French family business transmission. This mechanism, codified in Article 787 B of the General Tax Code, offers a 75% exemption on share value for calculating inheritance or gift taxes. Concretely, for a company valued at 1 million euros, the taxable base drops to only 250,000 euros, representing considerable tax savings. Statistics reveal that 85% of family business transmissions use the Dutreil pact, and this percentage climbs to 90% for mid-cap company transmissions. With nearly 3,000 new pacts signed annually, and 91% concluded during the business owner's lifetime through gifts, this mechanism stands as an essential reference in entrepreneurial estate planning.

To benefit from this exceptional tax advantage, several cumulative conditions must be rigorously met. The company must first exercise predominantly industrial, commercial, artisanal, agricultural, or professional activity, with purely patrimonial activities excluded since the 2024 Finance Act. A collective share retention commitment must then be made by the donor for a minimum 2-year duration, in effect on transmission day, covering at least 17% of financial rights and 34% of voting rights for an unlisted company. This collective commitment is followed by a 4-year individual retention commitment that donees must make. Throughout the collective commitment duration and for 3 years after transmission, one of the signatories or donees must exercise a management function in the company. These conditions, though constraining, guarantee shareholder stability and management continuity, the legislator's primary objectives.

The Dutreil pact proves particularly effective when combined with other tax optimization mechanisms. It can notably be cumulated with the 100,000 euro personal allowance per parent and per child in direct line, renewable every 15 years, as well as an additional 50% reduction in gift taxes if the donor transfers before age 70. Property dismemberment constitutes another powerful strategy: the leader can transmit bare ownership of shares while retaining usufruct, which first reduces the taxable base through the legal scale based on usufructuary age, then applies the 75% Dutreil exemption to this already reduced value. This combination generates considerable double tax advantage. Be careful though, the 2025 finance bill draft plans condition tightening with notably exemption limitation to strictly professional assets only and an age condition requiring at least one donee be between 18 and 60 at transmission time. These potential changes make anticipation even more crucial.

Structuring solid family governance

Family governance constitutes the foundation that will allow the company to serenely navigate succession and sustain entrepreneurial heritage across multiple generations. Yet figures reveal a French weakness on this point: only 14% of family businesses have a family charter, 18% have a family council, and only 8% possess both. This absence of formal structuring contrasts sharply with corporate governance, which professionalizes during transmission: 75% of family successors state they implemented structured family governance, marking the passage from an informal model inherited from founders to a formalized model. This evolution reflects awareness that family governance plays a predominant role in strategic decision quality and transmission process fluidity.

The family charter represents the first governance tool to implement. This document defines the principles and values guiding the family in company management, what is called affectio familiae. It allows writing down the concerned family scope, investment policy, philanthropic vision, capital access conditions and possible restrictions, as well as expected behaviors of family members in the company sphere and beyond. The charter can also create family governance bodies like a family assembly or family council. The latter, comparable to a board of directors but dedicated to family issues, offers a discussion space on major company questions. It ensures a dual mission: guaranteeing company sustainability while preserving family harmony. The more inclusive this council, including both active members and those not holding company functions, the more it reinforces belonging and responsibility feelings.

The family pact complements the charter by bringing a legally binding dimension to operating rules. Unlike the charter which states general principles, the family pact is a true shareholder agreement within the family that can go further in mutual constraints. It can provide clauses defining share buyback price determination methods if a family partner wishes to withdraw, develop a dividend distribution policy reconciling purely patrimonial family partners' interests with those participating in company development, or create an intra-family exchange allowing supply and demand meeting among family shareholders. The pact can also prohibit spouse capital entry or restrict extended family member hiring to avoid nepotism accusations. This anticipated legal structuring prevents potential conflicts and facilitates disagreement resolution when they occur, by offering a reference framework accepted by all.

Managing equity between heirs and preventing conflicts

One of family succession's major challenges lies in managing equity between heirs, particularly when the company is transmitted to only one child. This situation, frequent when only one heir manifests interest and necessary skills to take over the company, can generate significant family tensions if not anticipated and properly structured. The successor's siblings may feel injustice if they receive the entirety of an asset valued at several hundred thousand or even several million euros. French law moreover imposes respect for hereditary reserve guaranteeing each child a minimum succession share. To preserve family balance, the leader must therefore implement mechanisms allowing not to disadvantage other heirs while facilitating operational transmission to the successor child.

Several legal tools allow organizing this equity. Gift-partition with balancing payment constitutes a particularly adapted solution: the successor child receives the company but pays a sum of money, called balancing payment, to siblings as compensation for the share they did not receive. This structure's tax advantage is major: the balancing payment paid by the successor child is considered directly given by the donor parent, allowing all children to benefit from the Dutreil tax advantage and the 100,000 euro allowance, even those not receiving shares but a sum of money. For an individual business, classic gift-partition can be considered: one child receives the company, others benefit from donation of other patrimonial assets or equivalent monetary gift. Using a notary specialized in family business transmissions proves essential for structuring these complex operations and avoiding legal pitfalls.

Beyond legal mechanisms, conflict prevention relies on communication and transparency. Statistics show that fears of family tensions are shared by both transmitters and successors. To defuse these risks, organizing regular family meetings from the beginning of the transmission process is recommended to explain choices made, constraints encountered, and solutions envisioned. Independent director intervention on the board brings valuable outside perspective and certain authority that facilitates conflict resolution that family insularity can favor. Common seminars and workshops also allow the family to build shared vision of company future. Finally, coaching or specialized family business advisor support can prove decisive in helping family members express expectations, resolve disagreements, and maintain family harmony throughout this emotionally charged process. Data demonstrates that 97% of leaders who transmitted say they are satisfied with their transmission, proof that rigorous preparation and open communication allow overcoming obstacles.