Next-Gen Prosperity Blueprint: Transforming Wealth Succession in a Diverse Conglomerate Landscape

1. A conglomerate, established by Friends in various ventures, aimed to financially empower the next generation. In the FY 2023-24, the Promoters sold their active business vide a slump sale and thereafter, consulted a top economic succession planner on their future plans of retirement and enabling the next gen entrepreneurs. However, the advise and the structure implemented did not yield the desired result to the Promoters. They approached us with the following queries:
2. All funds are blocked in one entity, and repatriation for temporary investment faces a 35.88% tax exposure. Hence, tax and regulatory efficient funding mechanism to fund the new venture of the Next-gen. Further, the main entity converts into investment activities, would that be construed as Financial services and subject to approval from the Regulators.
   1. 1. Framework for cohesive decision-making among next-gen entrepreneurs needed for new ventures.
      2. Mechanics for ensuring independence in wealth deployment and decision-making in their respective ventures.
      3. New ventures to be conducive for onboarding investors as well as facilitate smooth exit.
      4. Profit sharing with entrepreneurs and structure to convert profits into equity.
      5. Cross-border structuring of the next-gen ventures that leads to round tripping.
      6. Establish a pension plan for founders and professionalize engagement with next-gen ventures.
      7. Create a structure to explore joint venture opportunities.
      8. Address gifting of shares from a resident to a non-resident from Indian Exchange control perspective. 
      9. And so on.

Following were our challenges:

1. Legal entity structure: A flexible structure needs to be designed to achieve the desired shareholding ratio among next-gen entrepreneurs, facilitating inter-company funding without triggering undue tax implications. It minimizes exit tax costs for the next generation, supports joint ventures, and allows decision-making rights, onboarding venture capital, listing, and enabling secondary exits.
2. Effective tax cost: Cash flow analysis to determine effective tax rate in the hands of the next gen entrepreneurs due to upstreaming of income and at the time of exit.
3. First generation entrepreneurs’ remuneration plan: Appropriate remuneration model that enables the first generation to commercialise their mentorship to the next generation entrepreneurs. 
4. Financial services: Structuring inter-corporate investment in a tax efficient method and in compliance with the Indian regulatory regime that mitigates unwarranted additional compliance obligations.
5. Cross-border holding structure as well as funding mechanics: Inbound as well as outbound shareholding structure and setting up seamless cross-border funding mechanics that is in compliance with the India’s exchange control regulations.

We’ve crafted a versatile structure along with a decision-making framework to address the mentioned challenges effectively