Family Investment Company (FIC’s)

What is an FIC company?

A Family Investment Company (FIC) is a structured way of holding and managing family wealth through a limited company, often used as part of long-term tax and succession planning. It is particularly relevant for individuals who have accumulated assets or surplus funds and want to pass wealth to the next generation in a controlled and tax-efficient way.

At its core, an FIC allows you to separate ownership, control and economic benefit. Rather than transferring assets outright to family members, which can result in an immediate loss of control, a company structure enables you to retain decision-making authority while gradually passing value to others. This makes it an attractive option for those who want to plan ahead without giving up oversight of their investments.

The structure of a Family Investment Company is key to how it works in practice. Typically, different classes of shares are created, each carrying different rights. For example, one class of shares may hold the voting power, allowing you to retain control over how the company is run, while another class may carry the rights to dividends and capital growth. This means that future increases in value can accrue to family members, while you continue to control how and when profits are distributed.

From an Inheritance Tax perspective, this can be particularly effective. By structuring the company correctly, future growth in the value of the underlying investments can sit outside of your personal estate. Over time, this can significantly reduce the potential Inheritance Tax exposure, while still allowing you to oversee the management of those assets. However, this type of planning needs to be carefully implemented to ensure it achieves the intended outcome.

An FIC is also subject to standard company tax rules. Profits generated within the company are taxed under Corporation Tax, which currently ranges between 19% and 25% depending on profit levels. This can be more efficient than personal tax rates in some circumstances, particularly where profits are retained within the company for reinvestment. When funds are extracted, such as through dividends, they are then taxed in the hands of the individual shareholders under the normal dividend tax rules. This creates flexibility in terms of how and when income is taken.

One of the main advantages of using a Family Investment Company is the ability to retain control. Unlike gifting assets directly, which removes them entirely from your control, an FIC allows you to manage investments, decide on distributions and respond to changing circumstances over time. This makes it particularly useful for long-term planning where flexibility is important.

That said, a Family Investment Company is not suitable for everyone. There are setup costs, ongoing administrative requirements and important tax considerations when transferring assets into the structure. It is essential that the company is set up correctly from the outset, particularly in relation to share structure and ownership, to ensure that it delivers the intended tax and succession planning benefits.

At Merranti Accounting, we work with clients to assess whether a Family Investment Company is the right approach for their circumstances. Where appropriate, we assist with structuring the company, coordinating with legal advisers where needed, and providing ongoing support to ensure the structure continues to operate effectively.

A Family Investment Company can be a powerful tool for long-term planning, offering a balance between control, flexibility and tax efficiency. When implemented correctly, it allows you to protect and grow wealth while preparing for the future in a structured and considered way.

Pass on Assets outside of Inheritance Tax (IHT) 

Stay in Control of the Company 

Remove Shareholders 

Family Investment Companies are becoming increasingly popular for business owners and entrepreneurs who want to pass wealth to the next generation without immediately giving up control. One of the most common concerns when passing shares or assets to family members is that ownership and control often go hand in hand. While the intention may be to transfer value, the reality is that not every family member will have the experience, judgement or desire to manage a company effectively. In some cases, disagreements can arise. In others, the knowledge and skillset needed to run the business simply may not be there. This creates a genuine challenge for those who want to plan ahead but still protect what they have built.

A Family Investment Company, often referred to as an FIC, can provide a practical solution to this problem. It allows the economic benefit of a company or its assets to be passed to family members, while control can remain with the person or people who are best placed to manage the company. In simple terms, it enables you to separate value from control. This means that family members can benefit from future growth, dividends or long-term wealth planning, while the key decisions remain in the hands of those who understand the business and its direction.

This is usually achieved through the creation of different classes of shares. Some shares may carry voting rights and control over decision-making, while others may carry rights to income or capital growth. This distinction is one of the reasons Family Investment Companies are so useful in succession planning. Rather than making an outright gift and losing influence over what happens next, the structure can be designed so that you continue to direct the company while gradually passing wealth to children or other family members in a controlled and tax-efficient way.

The rules that govern a Family Investment Company are extremely important and should never be treated as a standard set of company documents. The way the company operates will usually be set out in a carefully drafted Shareholders’ Agreement, alongside bespoke Articles of Association and the company’s Memorandum. These documents define what shareholders can do, what they cannot do, how decisions are made, how shares can be transferred, and what happens in certain events such as death, divorce, dispute or exit. The strength of an FIC is not simply in having a company structure, but in having the right legal and tax framework in place from the outset.

A well-drafted Shareholders’ Agreement is particularly valuable because it can protect the long-term intentions behind the structure. It can ensure that the controlling shareholders retain the necessary powers, while also providing clarity for family members who hold benefit shares. It can also deal with sensitive areas such as restrictions on transferring shares outside the family, the treatment of shares in the event of divorce, and the process to follow if relationships within the business break down. Without this level of planning, an arrangement that was intended to preserve wealth and harmony can quickly become vulnerable to disputes or unintended consequences.

Another important consideration is the ability to remove a shareholder from the company if circumstances change. In many Family Investment Company structures, this can be addressed through provisions such as good leaver and bad leaver clauses. These clauses can set out the circumstances in which a shareholder may be required to leave the company or transfer their shares, and how those shares should be valued. However, this is not something that can be handled casually. The ability to remove a shareholder depends entirely on what has been agreed in the company documents, and valuation can often become a key issue. This is why proper drafting at the beginning is so important. If the documents are vague or do not cover a scenario clearly, enforcing an exit may be difficult and costly.

Family Investment Companies can work particularly well where there is property held within a company and the aim is to pass long-term value to the next generation without surrendering control. This is often attractive to families who have built up investment property portfolios or other corporate assets and want to start succession planning while maintaining stability. The structure can allow future growth in value to sit with the next generation, while control remains with the founder or senior family members. For many clients, this balance is exactly what makes an FIC appealing.

That said, an FIC is not simply a matter of incorporating a company and issuing some shares. There are wider legal, tax and family considerations that need to be thought through properly. Marriage, divorce, incapacity, death and inheritance all need to be considered as part of the planning. For example, if controlling shares are retained by one individual, their Will should be reviewed to ensure those shares pass in accordance with the overall succession plan. A Last Will and Testament is therefore not an optional extra in this context; it is an essential part of making sure the structure works as intended over the long term.

There are also accountancy and legal costs involved in setting up a Family Investment Company correctly. The tax implications of transferring assets, the share structure, the ongoing administration of the company and the interaction with wider inheritance tax planning all need to be reviewed carefully. An FIC can be a very effective planning tool, but only when it is tailored to the family’s objectives and implemented with the right advice.

At Merranti Accounting, we help clients think through both the commercial and tax implications of using a Family Investment Company. The objective is not simply to create a structure, but to create one that works in practice, protects control and supports long-term family planning. When set up correctly, an FIC can be a powerful way to pass on value, preserve control and create a more structured approach to succession.

If you are considering passing on a company, property or family wealth but are concerned about losing control, a Family Investment Company may be worth exploring. The key is to get the structure right from the beginning and ensure that the legal documents, tax planning and wider estate planning all work together.