Understanding the benefits of a family investment company
Written by Sukie Shemar (pictured), partner and head of department at Enoch Evans Solicitors
A Family Investment Company (FIC) is a strategic designed to help families grow and manage their wealth across generations.
At Enoch Evans, our Corporate team has the expertise to assist you in establishing a FIC that aligns with your family's unique goals.
Setting up an FIC is just the beginning; it’s crucial to implement effective controls at the time of incorporation to ensure the seamless transfer of assets to future generations.
These controls are typically embedded in the Articles of Association and a Shareholders Agreement.
The Memorandum and Articles of Association can be tailored to meet your family's specific needs, such as outlining how family members will benefit from income and capital and determining voting rights.
These documents should be supplemented by a Shareholders Agreement, which is a private document not made public through Companies House.
This agreement can detail any loans provided to the FIC, often contributed by the founding shareholders, typically the parents, and lay out the decision-making processes and daily management of the company.
A significant advantage of an FIC is that family members, as directors, retain control over investment decisions.
The Shareholders Agreement can include provisions to restrict family members from transferring shares outside the family, ensuring these assets remain within the family lineage.
Provisions can also be included to place restrictions on future transfers, safeguarding the shares for lineal descendants.
In this way the Shareholders Agreement can lay out key day controls and measures which the founders of the FIC may prefer.
Each family's situation is unique, and it may be advisable for each member to hold a different class of shares.
Our Corporate team can guide you through the process of dealing with alphabet shares, enabling family members to receive income through dividends as declared by the directors.
While the FIC founder will also hold shares, these typically do not entitle them to significant company value but do offer voting rights, thereby maintaining control over director appointments and company operations.
If the founder serves as a director, they have the authority to manage company operations, including asset investments and dividend declarations.
An FIC is an excellent tool for future planning and succession.
With our expert guidance at Enoch Evans, a FIC can provide your family with control, protection, and peace of mind for generations to come.
Whether you are considering setting up an FIC or exploring how it can fit into your family's wealth management strategy, our team is here to support you every step of the way.
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In addition to the structural benefits, FICs provide a robust framework for engaging younger generations in financial management, offering them a platform to learn about investments, governance, and wealth management.
This educational aspect can be invaluable, supporting the development of financially savvy heirs who are well-prepared to take over the reins when the time comes.
With the proper setup and ongoing management, a FIC can be a pivotal component of a family's long-term financial strategy.