Family Investment Company (FIC) is a UK-resident private limited company, where the shareholders are family members. So, starting a family investment company means you are following the right strategy succession through inheritance where the wealth planning is quite efficient.
Previously, a Trust is considered as the reliable channel to pass the wealth to the future generations. But owing to the recent tax law revisions, maintaining a trust is not at all a tax efficient choice. This is where setting up a family investment company makes more sense as it offers great tax benefits with almost 20 percent from the total profit earned.
Before knowing how to set up an FIC, you should be exactly aware of how it works.
How does a Family Investment Company Works?
A FIC is formed by the parents of the family limited by shares. Each parent owns one master share ‘a’. Each of the ‘a’ shareholder has full right to appoint a dedicated director, and enjoy the right to vote at overall meetings. But the parents have no power to dividends or any return of investment. The children of the parents have one ‘b’ share each. Children holding the ‘b’ shares cannot enjoy the voting rights and other control rights, but full right to any dividends or return on investments, provided they are approved by the parents.
How to start your own Family Investment Company?
1. Come up with a responsibility agreement
This is the first step to start a family investment business, where the company memorandum, and the articles of association that are specially designed for the specific family requirements. Typically, the agreement should define the roles and responsibilities of the directors, define the type of business to be commenced, and the mode through which the shareholders can have control over the board of directors.
All these details must be clearly drafted and maintained.