Many entrepreneurs and family business heads find themselves with their holding company effectively acting as a family office. This is true of age-old family businesses and family holding companies that have taken on family office functions over time, such as the Agnelli controlled holding company Exor, and are now too set in their ways to change that.
Many European family businesses operate similar family office structures in the absence of a distinct family office. One of Germany’s richest men Heinz Hermann Thiele (owns Knorr-Bremse Group, the world’s largest producer of brake systems for trains and commercial vehicles) uses KB Holding as an investment vehicle and holding company. Sir Michael Bibby of UK-based Bibby Line Group states that he runs his business as a family office.
In Asia and the Middle East, family offices have been structured as holding companies for ease of investment in businesses opportunities as they arise. Tata Sons Private Limited acts as the holding company for the Tata family and the Yusuf Bin Ahmed Kanoo Group of Companies in the Gulf region acts as an investment vehicle for the Kanoo family.
The last 20 years have witnessed significant growth in family offices and a trend towards professionalizing the family office. Prominent examples of professional and dedicated family offices serving the family holding company are provided by the likes of Facebook’s Mark Zuckerberg but on a more reasonable scale has seen predominance in supporting capital accumulated by new and upcoming tech and innovation entrepreneurs.
Family Office
The term ‘family office’ is not properly defined in that it takes different shapes and forms for different families. Family offices run by 3rd generation family businesses are likely to differ from those being set up by new self-made innovation entrepreneurs coming out of their first liquidity event. To complicate matters further, the terms ‘family office’, ‘holding company’, ‘family holdco’ and ‘family trust’ are used very loosely. When Marcus* was addressing a family business conference I had invited him to, he casually stated that “my family office has acquired a majority stake in…” by which he meant his family office had overseen a deal whereby the family holding company acquired this participation through the appropriate investment SPV in accordance with holistic advice secured from our lawyers and tax advisors.
Family offices are often born out of a need to structure and professionalise the oversight and management of capital and investment decisions, for the protection and preservation of wealth. But family offices provide many services beyond investment management.
Family offices navigate various services and products for the family including banking, insurance, custody, asset management, trusteeship, legal and tax services. Family office heads and professional staff within or contracted by the family office routinely negotiate personal lines of credit, coordinate business and family travel, seek advice from external supporting lawyers and tax advisers, and discuss reports from external accountants. Family offices harness the family's purchasing power, negotiating better rates and terms on these products and services than individuals could negotiate alone. The professional staff at some family offices can review business plans developed by family members promoting the launch of new business ventures or considering a potential acquisition.
Holding Companies
As the name suggests, a holding company is an entity owning and holding one or more assets. Often specific assets are acquired and held by Special Purpose Vehicles (SPVs) for risk management, exit strategy and tax considerations, at times to allow for external investment while ring fencing other valuable family holdings.
Families are most protective with the holding of their investment portfolios and personal trading/brokerage accounts where capital is allocated to a dedicated Investment Holding Company and is managed either inhouse or with the help of asset managers.
A holding company may be used to hold a variety of assets, but best practice may dictate the segregation of assets by type, by purpose or by use through the use of asset holding companies. For instance, private jets, yachts, art, antiques, and any high value assets tend to be segregated in a jet / yacht holding company, and art holdco, and so forth.
More info on the Types and Uses of Holding Companies.
Business Holding Company
While personal or family holding companies are used to hold the family’s personal assets, holdings of a business nature can be grouped together in a business holding company. Often this bears the name of the specific business but holds assets such as intellectual property, plant and machinery and other business assets outside the business entity itself that bears the business’s operational risks.
Family Holding Company
It is common to see all the family’s asset holding entities grouped together in a family holding company that facilitates consolidated reporting and allows for liquidity pooling and financing. A family holdco allows the family office to present a strong well capitalised front on the negotiation table and deploys capital as required, but the family holding company is rarely the actual company that signs the deal when the ‘family office’ makes an acquisition. The family office represents and negotiates for the family, the family holding company deploys the capital, possibly signing on the letter of intent and the appropriate holding company actually acquires the asset or signs up the investment.
Our Malta Family Office Advisory Services
Led by Senior Partners Dr Jean-Philippe Chetcuti and Dr Priscilla Mifsud Parker, our Global Family Office Advisory practice undertakes a limited number of bespoke assignments each year. Family office advisory projects, which include family office design, review, audit, and advice, require a hands-on approach due to their complex and personalised nature.
Our multi-disciplinary approach ensures comprehensive all-in-house services to business families and successful entrepreneurs of all ages, addressing both their business needs and personal family goals. Specialist private client practices combine seamlessly together to provide best-in-class advice on personal tax, corporate tax, trusts, corporate governance, immigration and family law often on an international level. Our experienced family office lawyers understand the unique needs of families and offer strategic advice to enhance wealth growth and protection, business potential, smooth operations and effective personal lifestyle management.
Family Office Services in a Global Context
Our Family Office Structuring practice operates on a global level through our close network of legal and tax firms and works with best-in-class colleagues in their respective fields across the globe. This ensures we are able to offer our clients the best fit for their requirements without country bias.
