Are family-controlled stocks good?

The quality of family-controlled stocks depends on the performance of the company. Following CCB Trust’s first domestic stock family trust in 2019, which innovatively placed some of the existing stocks of controlling shareholders of listed companies into “discretionary” family trusts, in the following more than a year, CCB Trust has completed several The single-stock family trust has received good response from the market and provides effective tools and services for shareholders to preserve and inherit their wealth. Family trusts are becoming a centralized equity management tool for more and more family actual controllers.

In the service plan of the stock family trust, the descendants of shareholders can reasonably inherit (transfer) the rights and interests of the corresponding stocks through the trust beneficiary rights, and reasonably arrange the beneficiary rights, control rights, and management rights to avoid family conflicts. The death of offspring, changes in marriage, downward differentiation of blood relationships and other reasons lead to the outflow of property, ensuring the smooth inheritance of family property.

However, there have been no cases in the domestic market where the controlling stake of a listed company or a large proportion of equity exceeding 10% has been placed in the family trust of the controlling shareholder. Based on long-term research on mature overseas markets, CCB Trust has found that family trusts holding controlling shares of listed companies have positive effects on corporate value and corporate governance to varying degrees, and are the "standard" tool for family wealth management of listed companies. Therefore, domestic stock family trusts should also have broader application scenarios.

There will be a wave of handovers of controlling stakes in private listed companies in my country's capital market. How to pass it on reasonably?

(1) Inheriting equity to family members through traditional methods such as legal inheritance, donation or court judgment often leads to varying degrees of equity split, resulting in the inability to centralize the controlling rights of family businesses and the risk of decentralized decision-making in corporate governance. . The procedures for testamentary inheritance are complicated, and there are risks such as potential litigation during the inheritance process, difficulty in executing court judgments, and long tug-of-war times.

Family trusts holding shares of listed companies can avoid situations where the company’s shareholding ratio is dispersed, the family successor’s control over the company is diluted, or even the company loses control.

(2) The family trust holds shares of listed companies, which can achieve successful isolation of family members’ assets. Equity ownership will not be transferred due to the birth, old age, illness, death, marital changes, debts, or even immigration status of the entrepreneur or his descendants.