If you’re a business owner, investor, or part of a family with significant assets, you may be considering how best to protect and pass on your wealth. Family Investment Companies (FICs) are an increasingly popular option for those looking to manage succession in a clear and tax-efficient way.
What is a Family Investment Company?
A Family Investment Company is a private limited company set up to hold and manage wealth on behalf of a family. Rather than transferring assets directly to individual family members or using a trust, the assets are held within the company. This offers a number of benefits, including:
Setting Up a Family Investment Company
Getting the structure right from the outset is essential. That means legal, commercial, and tax considerations all need to be aligned with your family’s goals. We work closely with clients to design FICs that reflect their long-term intent, values, and governance preferences.
Here’s a typical process:
1. Clarify your goals
We begin by understanding what you want the FIC to achieve. Are you looking to build an investment pot for future generations? Do you want to ensure assets aren’t fragmented through inheritance? Your priorities shape the structure.
2. Design the company
We’ll help you create the company and register it with Companies House, usually as a private limited company by shares. We’ll advise on the right share class structure, and assist with articles of association alongside your lawyers, keeping your long-term goals in mind to ensure the FIC works both now, and in the future.
3. Fund the company
We’ll help you decide the most appropriate way to fund your FIC. This could include a loan to the company, a cash injection, a transfer of existing assets, or family share transfers. Each option has tax and control implications that need careful consideration.
4. Set governance and control
You may want to retain full control over decisions while still passing value to the next generation. For example, you and your spouse could act as directors, with your children holding non-voting shares. This protects control while allowing others to benefit from growth and dividends.
Clear governance at the outset avoids confusion or conflict later on.
5. Build the investment strategy
An FIC needs a clear, realistic investment strategy. We work with clients to design one that suits their goals, tax profile, and time horizon.
6. Ongoing compliance and support
With Hawsons, you’re not left to manage the structure alone. We provide ongoing advice and compliance support to help you get the best out of the FIC for years to come.
Why Choose an FIC?
There are several reasons why FICs are an attractive planning tool for wealthy families and business owners.
Tax efficiency and growth
FICs are subject to corporation tax, which is often lower than higher-rate personal income or capital gains tax. With careful structuring, dividends received by the company may also be exempt from tax. This allows the company to retain and grow wealth more tax-efficiently than if those same assets were held personally.
Succession and intergenerational planning
FICs allow founders to pass on future value while retaining control. By using different classes of shares – such as voting, non-voting, growth, or freezer shares – families can tailor who controls the company and who benefits from its performance.
If structured early and correctly, future growth in the value of the FIC can sit outside the founder’s estate for inheritance tax purposes.
Control and flexibility
Compared to trusts, FICs offer more flexibility. Business owners are often more familiar with corporate structures, and setting up an FIC gives them a way to plan for the future without giving up control today.
You stay in charge of decision-making while building something long-lasting for the next generation.
Asset protection and governance clarity
Because everything is held within a company, ownership, control, and benefit can be formally documented. This clarity becomes more important over time, especially as families grow and the next generation becomes involved.
How Hawsons Can Help with your FIC:
Our Corporate Finance team has deep experience advising families on how best to structure, fund, and manage Family Investment Companies.
We can:
- Review your current situation and objectives
- Advise on the most tax-efficient structure
- Design the share classes, assist with articles of association, and structure control arrangements
- Set up the company and ensure compliance with Companies House
- Provide long-term support and advice
If you’d like to speak with someone about whether a Family Investment Company is right for you, we’re happy to help. Contact our Corporate Finance team now!
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