In response to these challenges, an innovative strategy gaining momentum is transitioning company management to trust structures, also known as business trusts.
While not as common in Nigeria as in countries like the United States and Singapore, many Nigerian entrepreneurs are recognizing the potential benefits of using business trusts to ensure the continuity and sustainability of their enterprises.
As business owners age, they often become increasingly concerned about the future of their businesses.
They constantly ponder questions like who will take over the responsibility of sustaining the business and preserving its legacy after their retirement.
This anxiety is compounded by the reality that some entrepreneurs’ children may prefer to pursue their own aspirations rather than assuming control of the family business.
Business trusts involve transferring ownership of the company to a trust—a legal entity managed by a trustee, often a professional trust company.
The trustee oversees the business according to a predetermined trust deed, ensuring its future while benefiting designated beneficiaries, which may include family members, future generations, or even employees.
In Nigeria, the predominant business entities are private and public limited liability companies governed by the Companies and Allied Matters Act, widely used across various sectors of the economy.
Although business trusts are less common in Nigeria, they are utilized in sectors such as real estate investment, infrastructure development, and collective investment schemes. For instance, real estate investment trusts have gained popularity for pooling funds to invest in income-generating properties.
The Securities and Exchange Commission of Nigeria regulates collective investment schemes, including unit trusts and mutual funds, utilizing trust structures. Trusts offer advantages such as asset protection, tax optimization, and effective succession planning, which are increasingly relevant for modern businesses.
Unlike traditional corporate structures that may have limitations like personal liability exposure and complex governance, trust structures provide flexibility, protection, and strategic advantages. They safeguard company assets from liabilities, maintain privacy, facilitate agile decision-making, and ensure smooth succession planning.
Transitioning to a trust structure involves complying with Nigerian laws and regulations governing trusts, considering strategic goals, valuing company assets, selecting trustworthy trustees, establishing governance protocols, and effectively communicating with stakeholders.
Professional advice from legal, financial, and trust experts is crucial throughout the transition process to ensure compliance, mitigate risks, and optimize the benefits of trust-based management.
In conclusion, adopting trust-based management represents a significant shift for Nigerian businesses, offering comprehensive solutions to governance, asset protection, and succession planning challenges.
Businesses embracing this model are poised to thrive and contribute to Nigeria’s evolving business landscape, supported by improved education and a growing appreciation for effective corporate governance practices.
Related News
Gana, Managing Director of Greenwich Trustees Limited, can be reached on 08033335436
