When managing a family business with ties to more than one country, it is essential to understand the legal, structural and tax nuances involved in designing shareholder agreements and family protocols. One of the most critical challenges family businesses face is succession planning. In this context, shareholder agreements and family protocols play a central role in ensuring sound governance over family interests and wealth, regulating ownership, and planning generational succession.
The interplay between civil law and common law systems creates a complex legal landscape that brings both opportunities and challenges. For this reason, these instruments must be carefully tailored to ensure their effectiveness, legal enforceability and tax efficiency in each jurisdiction.
Shareholder agreements and family protocols are recognised in both jurisdictions and widely used in England and Spain. In both legal systems, these instruments are treated as private contracts, allowing parties broad freedom to determine their content and restrictions.
Generally, neither Spanish nor UK law mandates specific formalities for validity, although certain formalities may be advisable in practice to maximise legal enforceability. For example:
Understanding these structural differences and formal requirements is essential when designing cross-border agreements.
Before diving into practical steps, it is important to understand the key differences between the UK and Spanish inheritance and succession frameworks.
In the UK, succession planning for family businesses combines private legal instruments—such as shareholder agreements, family protocols, wills, and trusts—with targeted inheritance tax reliefs. These mechanisms work together to help ensure that ownership transitions are legally coherent and may be tax-efficient.
English law allows significant autonomy in testamentary dispositions, enabling family members to decide how business assets are distributed upon death. This contrasts with the more restrictive mandatory heirship rules under Spain’s civil-law system.
In the UK, Inheritance Tax (IHT) is generally charged at 40% on the value of an individual’s estate exceeding the combined nil-rate bands. Families may be eligible for Business Property Relief (BPR), which can reduce or eliminate IHT on certain business assets, subject to specific conditions.
Under current legislation, relief may be 100% or 50% depending on the type of asset and whether all qualifying conditions are met. From 6 April 2026, the 100% relief will generally be limited to the first £1 million of qualifying business per individual, with any excess potentially eligible for 50% relief.
Early and structured planning may help families manage potential tax exposure effectively, subject to the rules and conditions in force at the time.
Families may also transfer business assets during the founder’s lifetime. Gifts made more than seven years before death, known as Potentially Exempt Transfers (PETs), can fall outside the donor’s estate for IHT purposes, enabling gradual inter-generational transfers.
Gift with Reservation of Benefit (GWROB) rules prevent donors from retaining control or use of transferred property while claiming tax relief. These provisions ensure that transferred assets are effectively removed from the donor’s taxable estate only if conditions are met.
Trusts are a cornerstone of UK succession and tax planning. By transferring assets into a trust, families can manage control, protect heirs, and potentially mitigate IHT exposure:
Trusts allow families to separate legal and beneficial ownership, offering flexibility not available under Spanish civil law, where trusts in the UK sense are not recognised.
In Spain, succession planning for family businesses is primarily governed by statutory rules rather than private contractual instruments. Whereas the UK common-law system relies on the flexibility of trusts and private agreements, the Spanish civil-law framework places greater emphasis on inheritance law, company law, and tax provisions. Fortunately, the law contemplates several tax reduction strategies if several requirements are met and an appropriate planification is made.
Well-drafted family protocols help define rules for succession, reducing the risk of conflict and providing a framework that supports long-term continuity.
Because Spain does not recognise trusts as legal entities, wealth and business interests cannot be separated between legal and beneficial ownership as they can in the UK. Instead, Spanish families rely on other legal mechanisms, such as shareholder agreements, family protocols, and, in some regions, succession pacts, to structure inter-generational transfers in compliance with civil-law requirements.
These instruments can complement succession planning and help mitigate conflicts, but they must be carefully tailored to comply with legal obligations and formalities. Proper design enhances enforceability and legal certainty.
Under Spanish civil law, family and business succession must operate within a set of mandatory inheritance provisions, including the forced-heirship (legítima) regime, which limits testamentary freedom and requires careful coordination between estate planning and family agreements.
This restriction contrasts with the UK’s principle of testamentary freedom, where individuals can dispose of their assets almost entirely at will. For family businesses, the Spanish model can complicate succession.
In Spain, the Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones) may provide reductions in the taxable base for transfers of family-business assets, subject to specific requirements. These reductions vary significantly depending on the Autonomous Community where the assets are located.
Certain regions, such as Andalusia, have some of the most favourable regimes for transfers to close relatives, offering potential substantial tax relief provided that the heirs maintain ownership and participation in the family business for a minimum period. However, eligibility depends on careful compliance with both national legislation and regional rules.
Failure to meet these conditions may result in personal tax consequences, including potential capital gains taxation under the donor’s income tax (IRPF).
Well-drafted family protocols and shareholder agreements can complement tax planning by defining succession rules and governance mechanisms, supporting continuity and reducing the risk of disputes among heirs.