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Do you have a succession plan for your business? Here’s why it’s important
May 6, 2026
Succession planning is one of the most important processes most business owners will deal with, yet it remains one of the most consistently overlooked parts of running a company.
Our M&A expert, Stephen Thompson, shares insights into the corporate framework and considerations that are central to effective succession planning, and why addressing this at an early stage is critical.
Too many business owners treat succession planning as a problem for the future, meaning it remains at the bottom of their list of priorities as the day-to-day rigours of running a business take over.
In practice, failing to plan accordingly is itself a decision, and in most cases a costly one. Without appropriate structures in place, a business leaves itself open to shareholder disputes, unwanted third-party ownership, potential tax liabilities, and a breakdown in key relationships.
The complexity of the corporate landscape and the number of potentially tricky issues to navigate, means that early, specialist advice is crucial.
In order to plan for the future, it is crucial that the relevant legal documents are thoroughly drafted and address all key concerns. For limited companies, two primary documents govern how succession can be managed:
A company’s Articles set out its constitutional rules. The SHA, a legally binding document governing the actions of the shareholders of the company, go much further, addressing the specific needs of owners. It is important that both of these documents are consistently reviewed and kept up to date.
Shareholders’ Agreements: A well-drafted SHA governs what happens to shares when circumstances change, for example as the result of an exit or a sale. Some of the key provisions of these are as follows:
Cross-Option Agreements: This is a legally binding arrangement between business owners, usually backed by insurance, that ensures surviving owners can buy a deceased partner’s shares. On death, surviving shareholders gain an option to buy and the deceased’s estate an option to sell, at an agreed or independently valued price. The result of this is continuity, fair value for the departing owner’s family, and control retained by those already part of the company.
Articles of Association: Even where a SHA exists, the Articles remain the first port of call in any dispute. Many owners are unaware of the default provisions under the Companies Act 2006, which may not reflect their intentions for the business. Therefore, it is crucial that the articles do not remain silent on areas that require amendment.
Family businesses can bring about a further layer of complexity to succession planning in the sense that expectations of any family members involved in the business must be managed suitably. Who will manage the business and who will own it are separate questions, and the answers may not be the same. A well-drafted SHA is the best way to ensure these tensions are managed effectively.
A succession plan is only as effective as the documents that govern it. The suite of documents typically required for an effective plan includes updated Articles, a well-drafted SHA, cross-option agreements, life insurance policies, and lasting powers of attorney for key decision-makers. These must be consistent with one another and reviewed regularly as the business evolves.
Business succession planning spans a number of areas of law which require specialist advice and assistance to manage. The businesses that navigate succession most effectively are those that begin planning early and take specialist advice from the outset.
The legal tools are well-established, what is often lacking is the impetus to act and the awareness of its importance.
If you are considering putting a succession plan in place you should start by gathering the relevant documentation, including your current Articles of Association, any existing Shareholders’ Agreement, and details of key assets and ownership structures. Seeking legal advice at the earliest opportunity will help you navigate the range of options.
As with any legal matter, succession planning can be a complex process, and the decisions made at this stage can have lasting consequences for your business. Having advice from the outset puts you in the strongest possible position to ensure that your intentions for the business are met exactly.
If you need assistance with planning for the future of your business, our specialist M&A solicitors have a wealth of experience in this area.
Next week, our expert, Steve, will also be speaking at the Succession Planning for Business Owners event (13 May) where key practical and legal considerations will be explored in more detail. Find out more and book your free place here.
For a free, no-obligation consultation, please contact us on 02920 829 100, or via our Contact form.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
