【Featured Article: Equity Trust – A Smooth Transition for Family Businesses】

Mr. Zheng, the founder of a chain restaurant business, has a 26-year-old only son who lacks management experience. While Mr. Zheng wishes to gradually hand over control, he worries that dispersed equity could lead to operational instability. To ensure a structured succession, he places 60% of the company’s shares into a trust.

Trust Agreement:

• His son must work in an entry-level position for three years and pass an evaluation before joining management.
• Equity dividend rights are unlocked annually based on performance targets.
• If the son increases company profits by over 30% within five years, he gains full decision-making authority.
• In the event of major business mismanagement, the trustee has the right to appoint a professional manager.
• The trust retains 20% of profits for an employee stock ownership plan, aligning key personnel interests.

Using a Family Trust to Balance Succession and Transformation

✅ Performance-based evaluation to select a competent successor, preventing disruptions from forced succession.
✅ Retained control mechanisms to mitigate operational risks and safeguard the family business.
✅ Profit-sharing design to enhance team cohesion and ensure long-term business sustainability.