Passing on the shares in a family company is a defined legal process, shaped by the company’s articles, any shareholders’ agreement and the tax position at the time. Passing on the confidence of the customers, the team, the bank and the rest of the family is the part no document can do, and it can take years. Business succession planning is the work of building that confidence alongside the legal steps.
For a heating, ventilation and air conditioning (HVAC) company, that confidence rests on things that are easy to take for granted while the founder is still in the chair: who the facilities managers and main contractors ring, which engineers the company’s Gas Safe registration and F-gas company certification rely on, and who prices the planned maintenance renewals. The same applies to the electrical and renewables work HVAC companies may also take on, from NICEIC or NAPIT registration to MCS certification for heat pump and solar PV installs.
Handing the business to the next generation is one of several ways an owner can step back, and much of the groundwork is shared with exit planning for a sale.
Why is succession a transfer of confidence rather than a single event?
Several groups need to be confident before a successor can take over, and each is looking for something different:
- Customers want to know that service levels, response times and the people they deal with will hold.
- The team wants to know that decisions will be made fairly and that the business will keep winning work.
- The bank, insurers and certification bodies want to know who is responsible and who they deal with.
- Family members outside the business want to know that what may one day be part of their inheritance is being run well.
None of that confidence can be handed over on a set date. It is built by the successor making decisions, and being seen to make them, while the founder is still around. The date the shares change hands or the founder retires is the end point of the plan, not the plan itself.
It also helps to separate two kinds of succession that are easily run together. Management succession is about who runs the business. Ownership succession is about who owns it. They can happen at different times, and they do not have to go to the same person.
What mandate does a successor need to lead?
A job title tells the team who the successor is. A mandate tells them what the successor can decide. In an HVAC business that might include pricing tenders and maintenance renewals, hiring engineers, agreeing customer terms, committing spending up to an agreed limit and presenting the monthly numbers to the bank. Where those decisions are written down, and the founder does not quietly overrule them, the team learns who to go to.
Once the successor joins the board, the role carries legal duties as well as authority. Under section 172 of the Companies Act 2006, a director must act in the way they consider, in good faith, most likely to promote the success of the company for the benefit of its members as a whole. In doing so they must have regard to matters including the long-term consequences of decisions, the interests of employees and the need to foster the company’s business relationships with suppliers, customers and others.
A mandate also depends on what the successor knows. Estimating, contract management, cash flow and people management can each be learned inside the business or brought in from outside, and some families split the job, with a family member as owner and a non-family manager running operations. How the shape of a business affects who makes decisions is covered in business structure for growth.
Check your business: Successor readiness
- Has someone other than the founder already made pricing and hiring decisions without the founder signing them off?
- Are the decisions the successor can make written down, with limits everyone in the business knows?
- Has the successor presented the monthly numbers to the bank?
How does family business governance differ from family harmony?
Family harmony is about whether people get on. Governance is about how decisions get made when they do not. A family that gets on well can still run into trouble if nobody has agreed who decides what.
In a family company, one person can hold several roles at once: shareholder, director, employee and relative. Each role carries different rights. A shareholder votes on certain decisions and receives dividends when they are declared, depending on the class of shares. The directors manage the company and owe duties to it. An employee is paid for the job they do. Problems can start when the roles blur, for example when a family shareholder who does not work in the business expects a say in day-to-day decisions, or when pay and dividends are used interchangeably.
The documents that set out how decisions are made include:
- The articles of association, which set the rules for running the company, including how shares can be transferred.
- A shareholders’ agreement, which can cover matters the articles do not, such as what happens if shareholders deadlock, if a family member wants to sell, or if a shareholder who works in the business leaves.
- A family charter, which is a statement of intent rather than a contract, and records the family’s shared view on matters such as how family members can join the business and how the family and the business keep their decisions apart.
One of the matters a director must have regard to under section 172 is the need to act fairly as between members of the company. Where some family members own shares but do not work in the business, that sits alongside the practical question of how the people running the company are rewarded.
Two practical points sit outside the company’s own documents. Where the founder owns the premises personally or through a pension scheme, the plan needs to cover what happens to them as well as to the shares. And if the founder became unable to act, a lasting power of attorney for property and financial affairs lets a chosen person make decisions about their money and property.
How do customers and suppliers respond to a change of leadership?
An HVAC company’s revenue can depend on relationships: the facilities manager who renews the planned maintenance contract, the main contractor who calls the company in on new builds, the distributor who extends credit. Each of them may have dealt only with the founder. A change of leadership raises a simple question for each of them: will things carry on as before?
Introducing the successor early, in account reviews, on site meetings and as the named contact on contracts, lets those relationships move over gradually. Some arrangements need a more formal check:
- Frameworks and maintenance contracts may name key personnel, or come up for renewal or re-tender during the handover.
- Personal guarantees given by the founder for supplier credit or company borrowing raise the question of who stands behind the business once the founder steps back.
- Trade registrations rely on qualified people as well as on the company. Gas work in homes must be carried out by Gas Safe registered engineers, as the Health and Safety Executive explains. For electrical work, the NICEIC Approved Contractor scheme asks the business to nominate one or more Qualified Supervisors, so in an electrical contracting company the founder may be one of the people the registration relies on.
The same relationships matter when a business is valued, as set out in how buyers value an HVAC company.
Check your business: Relationships and handover
- Do your largest customers and main contractors already deal with the successor, not only the founder?
- Is anyone besides the founder relied on for the company’s Gas Safe, F-gas, NICEIC or NAPIT, or MCS registrations?
- Do you know which supplier accounts and loans the founder has personally guaranteed?
What does “fair” mean when ownership and roles are passed on?
Fair and equal are not always the same thing. Where one child runs the business and others do not, an equal split of the shares gives everyone the same ownership, but the person doing the work may then be building value that others share without contributing to it. An unequal split rewards the work, but can feel unfair to those who receive less.
Families settle this in different ways. Some use different classes of shares, separating voting control from a share of the dividends. Some pay the family member who runs the business a market salary for the job and treat dividends as the return on ownership. Some leave other assets to family members who do not join the business. Some arrange for the next generation to buy shares with part of the price paid later, one of the funding routes also used in a management buyout.
The factors that decide which approach fits include who will run the business, who carries the risk, how much cash the business can pay out without holding back its work, and what each family member expects. Tax rules also shape the options. A gift of shares is treated as a disposal at market value for Capital Gains Tax under section 17 of the Taxation of Chargeable Gains Act 1992, and where the conditions are met, Gift Hold-Over Relief, claimed jointly by the giver and the person receiving the shares, means no tax is paid at the time of the gift; the person receiving the shares may pay it when they later sell. For Inheritance Tax, Business Relief can reduce the value of qualifying business interests. From 6 April 2026, 100% relief is limited by an allowance shared with agricultural relief, with relief at 50% on value above it, as HMRC’s Inheritance Tax Manual sets out. The position needs checking at the time of planning.
How can a succession plan keep the option to change course?
Plans change. A son or daughter may decide the business is not for them after all. A health change may bring the timetable forward. An approach from a buyer may arrive part-way through. A business that already runs without its founder has more routes open when that happens.
That is why the work in this post overlaps so much with preparing for a sale. A written mandate, shared customer relationships, clear governance and reliable monthly numbers help a family successor take over, and they also make a sale, a management buyout or an employee ownership trust possible if the family decides on a different route. Some families build in review points, such as a set period for the successor to run the business before the shares transfer, so that the decision can be revisited with evidence rather than hope.
Frequently asked questions
A family business succession plan sets out how the running and the ownership of a family company will pass from one generation to the next. It covers who will lead the business, how they will be prepared, how decisions will be made among family members, and how and when shares will change hands. It can take years to put in place, rather than being written in one go.
Management succession is about who runs the business day to day. Ownership succession is about who holds the shares. The two can happen at different times and go to different people, for example where a family keeps ownership while a non-family manager runs operations.
When a change means someone becomes or stops being a person with significant control, or their control changes, the company must tell Companies House within 14 days. They include people who hold more than 25% of the shares or voting rights, or who can appoint or remove a majority of the directors. GOV.UK explains who counts and when to report.
Business Relief reduces the value of qualifying business interests when Inheritance Tax is worked out. It can also apply to lifetime gifts, subject to conditions, including the giver having owned the business for at least two years and the person receiving it keeping it as a going concern until the giver’s death, as GOV.UK explains. From 6 April 2026, 100% relief is limited by an allowance shared with agricultural relief, as set out in HMRC’s Inheritance Tax Manual.
Gift Hold-Over Relief means Capital Gains Tax is not paid when certain business assets, including some shares in trading companies, are given away. Instead, the person who receives them may pay tax when they later sell or dispose of them. The giver and the person receiving the assets claim it jointly. GOV.UK sets out the conditions.
Sources
- GOV.UK: Business Relief for Inheritance Tax
- GOV.UK: Business Relief for Inheritance Tax: give away business property or assets
- HM Revenue & Customs: Inheritance Tax Manual IHTM25510, agricultural and business relief 100% relief allowance
- GOV.UK: Gift Hold-Over Relief
- GOV.UK: People with significant control (PSCs)
- GOV.UK: Make, register or end a lasting power of attorney
- legislation.gov.uk: Taxation of Chargeable Gains Act 1992, section 17
- legislation.gov.uk: Companies Act 2006, section 172
- Health and Safety Executive: Domestic gas: frequently asked questions
- NICEIC: Approved Contractor scheme
Sources last checked: October 2026.
