What Is A Family Investment Company?

A Family Investment Company can apply to many different types of company structures used for different purposes, although originally, they began as estate planning vehicles to protect family assets ...

In this blog post, I'm summarising how an FIC can be a useful structure for a family business. The structuring of FICs is a complex area that has lots of options available on how shares are allocated so I always recommend taking professional tax advice before creating one.

Essentially, an FIC is a company that has been established with the specific purpose of meeting the needs of, usually, a single-family. FOCs allow the founders of the business to retain some involvement within the company and possibly a managed income stream, but also pass the investments down to their children or grandchildren!

It may be the favoured solution when compared to trusts as they are a more familiar structure, though I do recommend that the option of a trust should always be considered. A Family Investment Company is usually set up as a new company with moderate levels of share capital to provide a reasonable capital base. Giving the family cash amounts in order to allow them to subscribe for shares means there are no issues with share valuation.

Investments can be in any form a company is allowed to hold and typically includes property and/or equities. It will normally have adopted bespoke articles of association that include restrictions on who can own shares and who can control the company.

If maintaining the ownership of the company within the direct family is one of the aims of setting up the FIC, articles can be written to restrict ownership of shares to bloodline members of the family only. This does mean the shares would still be in the estate of any child when they die and therefore if their estate specified a value to be transferred to a non-family member, this may have to be done using another asset within the estate.

"Most FICs are incorporated in the UK and are tax resident here, but some families incorporate offshore!"

The disadvantages of setting up an FIC are in the administrative requirements of running an actual company. There is the possibility of a double layer of taxation on profits taken out and a liquidation or demerger if children want to realise or split the business in future. This could be quite costly.

When setting up a Family Investment Company, you should be aware of general anti-avoidance provisions and the Disclosure of Tax Avoidance Scheme. Again, I reiterate, do take professional tax advice before setting up an FIC.

If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.