Family Investment Companies Explained: How Control Shapes Succession Planning

As part of our new series on Family Investment Companies (FICs), today we explore one of the most critical aspects of these structures: control and what it means for succession planning.

Control is often a key driver for setting up a FIC. Founders typically want to benefit their family, whether through an immediate gift of shares or by passing on future growth. However, by making that gift through the FIC structure, they are not exposed to all of the limitations that come with an outright gift of cash. Any interest gifted sits within the FIC wrapper and is subject to the rules governing that company; rules that determine who controls the FIC and how that control operates.

Like any company, FICs operate under two principal layers of control:

• Board of Directors

Responsible for day-to-day decisions, such as managing investments, appointing advisers, and determining dividend policy. Most board decisions require a simple majority, but this can be tailored.

• Shareholders

Certain decisions, such as appointing or removing directors or amending governing documents, typically require shareholder approval. Shareholder decisions usually focus on matters which impact the rights or value attaching to shares.

This dual control mechanism allows flexibility in involving family members at different levels. Governing documents can be drafted to ensure decision-making rests with the most appropriate individuals.

A Word of Caution

Some founders wish to transfer economic value to family members while retaining full shareholder voting control. HMRC has cited international case law suggesting that voting shares which have no economic rights can still carry significant value, and an oft-cited starting point for voting shares is that they may carry up to 25% of the company’s worth.  This could mean more value remains in the founder’s estate than intended, potentially triggering (or increasing) Inheritance Tax (IHT) exposure.

Alternative Structures

We work with clients to design bespoke solutions. One common approach is introducing a trust shareholder which could hold capital and/or voting shares. Founders can act as trustees (always in the trust’s best interests) and retain an element of control while reducing IHT exposure. We can also look at how control at board level may be an adequate substitute for shareholder control, subject to important protections being built in.

Trust shareholdings also offer additional advantages, which we cover in another video in this series.

In summary, careful structuring of control mechanisms ensures founders can guide the company while enabling smooth succession. FICs aren’t a replacement for trusts, they’re a powerful complement, particularly in light of upcoming changes to business property relief post-April 2026, which will limit IHT planning for business owners. 

Watch the video below for more insights, and stay tuned for future episodes in our Family Investment Company series.