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FJVA Updates

Mapping out a vision for the future

By January 15, 2024May 16th, 2024No Comments

Longevity in business is rooted in effective succession planning, with company founders and management ensuring their legacy is passed down to the next generations. And, as Dr Ruth Agius Scicluna Buttigieg, the Head of Advisory and Tax Compliance at FJVA, and Dr Andrew James Abdilla, the firm’s Senior Manager in Tax Advisory, tell Rebecca Anastasi, the cornerstone to future-proofing an enterprise is to chart the course today, rather than tomorrow.

“I think that if you’re really passionate about your business, then you need to map out the journey, take stock of what you have, and preserve what has been built,” says Ruth Agius Scicluna Buttigieg, Head of Advisory and Tax Compliance at FJVA, a company service provider offering various solution-based services such as corporate, regulatory and tax services, corporate structures and restructuring, residency, citizenship and relocation, and family business support services, among others.

FJVA was established in 1998 by Francis J. Vassallo together with his daughter Adriana Camilleri Vassallo. The decision to set up FJVA came after Mr. Vassallo’s tenure as Governor of the Central Bank of Malta ended, which was preceded by decades of experience with Chase Manhattan Bank. In 2019, Mr Vassallo passed the baton to Mrs Camilleri Vassallo, giving the firm invaluable experience with all the factors in play when one generation makes way for another: “For us, succession planning is not something we learnt from theory,” says Dr Agius Scicluna Buttigieg. “We have seen transition occurring here at FJVA. Having been through the challenge ourselves, we are better positioned to use our experience as a tool to help guide our clients.”

The firm employs a common sense approach to help businesses establish an enduring legacy, with leaders often seeking to solidify the investments they’ve made in their companies – financial, emotional and practical – for the longer-term. Survival is, undoubtedly, the privilege of those firms that think ahead and design an effective succession plan for their company. “There are a multitude of opportunities and benefits to succession planning,” says Andrew James Abdilla, FJVA’s Senior Manager in Tax Advisory. “Just to list a few: we’re looking at protecting the business, growing it and its assets. There is the preservation of harmony, particularly when the company is family-owned. Moreover, by planning for the future, you can reduce or eliminate certain estate taxes, while also enabling the current leadership to have a hand in shaping the future of the business they’ve worked so hard for,” he explains.

Dr Agius Scicluna Buttigieg concurs, adding that “the owner can adjust the plan” once it is in place, and, therefore, “protect their assets, and be agile enough to adjust to circumstances, without letting any adverse events have a huge impact.” Moreover, in terms of timing, “it’s never too early to plan. No one has a crystal ball, so it’s better to look ahead, early, and to have the necessary time to adjust, rather than leaving it too late – so late, in fact, that you cannot implement the plan you want, or see it come to fruition in the way you would want. So, think ahead, then identify any changes you may need, and adjust accordingly. I would advise business leaders looking to ensure the longevity of their companies, to be on the lookout for talent who can contribute to the business, and incentivise them to make sure they remain in the long-term,” she insists.

No one has a crystal ball, so it’s better to look ahead, early, and to have the necessary time to adjust, rather than leaving it too late.

Dr Ruth Agius Scicluna ButtigiegHead of Advisory and Tax Compliance

This is particularly crucial in Malta, say Dr Agius Scicluna Buttigieg and Dr Abdilla, due to the prevalence of family companies. “We have clients who enquire about the possibility of retaining control while implementing a balanced ownership structure,” Dr Abdilla asserts. “There are indeed ways of retaining control over certain management functions of a specific organisation through vetoes and supervision, for instance. In addition, here in Malta, there are other challenges with regards to crystallising certain taxes, and how to pay for those taxes which arise in succession, since this varies according to the jurisdictions and the parties involved.”

Dr Agius Scicluna Buttigieg expands upon these points: “succession in family businesses typically involves two aspects. Firstly, we need to find ways of allowing the current owners to transmit their ideas, and values, while also embracing change and new realities. There has to be a bridge between the old and the new; there has to be an element of passing things on. Then, secondly, we need to find ways of integrating the management team, so they can contribute to the family business, even if they’re not related to the founders. Each family is very particular, and this is where our strength as a firm comes in, since we believe that there isn’t no one-size-fits-all solution. So, we sit down with the family, speak to them, understand the business, and discuss the wishes of the family members – not just the current owner but also those of the next generation – so we can devise what works for that particular family,” the Head of Advisory states.

In other words, Dr Abdilla continues to explain, “we have to distinguish between ownership succession and the management of a business organisation.” These are two sides of the same coin, and “need to be looked at cohesively. Succession planning isn’t just accomplished by passing on the ownership – or the wealth – of an enterprise to another entity or individual, but we need to ensure that the plan takes into account the succession of the management of the organisation. This will ensure the overall sustainability of that particular business,” he explains.

This process entails determining “the strengths and skills” of the parties involved, Dr Agius Scicluna Buttigieg adds; a task, which can be facilitated through FJVA. “You can then identify how to take that forward,” she says. Cataloguing other assets – investments, equipment and premises, for instance – will also “enable the business to diversify, grow the assets it has in hand, and build further.” Such a strategy will also allow the company’s management and leadership to “create a balance between the active business and the long-term preservation of assets,” she says.

Innovative structures also support succession planning. “You could, for instance, use a Maltese private interest foundation. This is an effective tool, and is, in some cases, more appropriate than a trust, since it’s an autonomous entity, similar to a company, which manages your assets, but instead of shareholders you have beneficiaries,” Dr Abdilla explains. Dr Agius Scicluna Buttigieg provides further detail: “there’s also the possibility of having segregated cells within the same foundation, allocating certain assets to certain cells, with the beneficiary of that cell being a family member. So, while the assets are segregated, they are all still held within the one family umbrella, so to speak,” she says.

Moreover, returning once again to the question of control but, this time, in the setting up of a foundation, “a regulated administrator, such as FJV Fiduciary Ltd, part of the FJVA Group, can provide peace of mind, since everything will be done in accordance with the statute of the entity, and its legal obligations,” Dr Agius Scicluna Buttigieg continues. A business may also decide to open a second foundation/a cell within the same foundation to incentivise management or key people within the structure, “therefore creating a vehicle for them to benefit directly, and one which is not based solely on a system of bonuses. So, there’s more commitment shown on behalf of the owners; there’s something more solid and tangible,” she says.

Succession planning isn’t just accomplished by passing on the ownership – or the wealth – of an enterprise to another entity or individual, but we need to ensure that the plan takes into account the succession of the management of the organisation. This will ensure the overall sustainability of that particular business.

Dr Andrew James AbdillaSenior Manager in Tax Advisory, Francis J. Vassallo

Elaborating further on how succession planning aids the development and consolidation of investment opportunities, Dr Abdilla states that “a particular owner or the management might have identified a set of investments, and, if there is a proper vision, and a proper plan to accompany that vision, then we at FJVA are able to understand what the successors could have in mind for the future of the business. This will help us enable the business to establish certain investment horizons, as well as incorporate new ideas, all of which can then be translated within a proper structure.”

Businesses in diverse industries will require a specific set of skills and expertise which fit that particular sector, Dr Agius Scicluna Buttigieg continues. “Changes might be happening within a particular industry. This is why the vision needs to be well-planned out according to the context within which the business is working and why there needs to be an understanding of these contexts,” she says.

Indeed, Dr Agius Scicluna Buttigieg states, “our motto is that businesses need to be prepared. The more they’re prepared for the future, the more they’ll be able to adapt to changes and to anything which affects the business.”

This article has been published on MaltaInvest 2024 Publication by Content House. Featured Image: Inigo Taylor