Ownership is Earned, Not Inherited!

By Prof. Enrique Soriano

For many founders, passing on ownership to the next generation is a deeply emotional and symbolic act. It represents a lifetime of hard work, sacrifices, and the desire to create a lasting legacy. But what happens when that legacy is taken for granted? I once worked with a third-generation family business where the founder’s children inherited shares without financial obligation. While some took their roles seriously, others viewed ownership as a birthright, cashing in on dividends while contributing little to the business. Over time, conflicts arose, performance declined, and the company struggled to stay competitive. Eventually, the family had to bring in outside investors, leading to a loss of control. This could have been avoided had the founder instilled a stronger sense of accountability through structured ownership.

Traditionally, family business shares are transferred as an inheritance, gifted freely to children as a sign of love and responsibility. However, an alternative approach—selling shares to the next generation—offers several long-term benefits that ensure business continuity, professional stewardship, and enhanced accountability.

Selling Shares to Your Children Is the Right Thing To Do

Having successfully guided two family businesses through the process of ownership transfer via selling shares, I have seen firsthand the transformative impact it can have. In my most recent case, it took over three years to convince the founder to embrace this unconventional approach. Initially, he was strongly opposed to the idea, believing that ownership should be given, not purchased. Over time, through real-world examples and in-depth discussions, he realized that selling shares would strengthen, rather than diminish, the family’s legacy.

Here’s why selling shares to children is the right decision:

1. Fosters a Sense of Responsibility and Stewardship

Ownership should come with responsibility. When children purchase shares, even if through structured payment plans such as future dividend payouts, they develop a stronger sense of accountability. They no longer view their stake as an entitlement but as an asset that must be managed wisely.

2. Prepares the Next Generation for Financial Discipline

Buying shares requires financial discipline. It teaches the next generation the importance of making sound financial decisions, managing business risks, and ensuring profitability. Those who invest their own money in ownership will naturally be more diligent in safeguarding the business’s future.

3. Eliminates Entitlement and Encourages Meritocracy

Gifting shares can sometimes create an unintended culture of entitlement, where family members feel they deserve ownership regardless of their contribution. By contrast, a purchase-based transfer ensures that only those willing to invest in the company become shareholders, reinforcing a meritocratic culture.

4. Strengthens Business Governance and Reduces Conflicts

Many family disputes arise when shares are freely distributed without clear guidelines. Selling shares creates a structured transition process, often accompanied by well-defined governance policies. This reduces ambiguity, ensures fairness, and minimizes potential conflicts between siblings.

5. Ensures the Founder’s Financial Security

For many founders, their business is their primary source of wealth. Selling shares allows them to convert some of their ownership into liquidity, providing financial security during retirement while ensuring that the business remains in capable hands.

Key Learnings 

Selling shares to the next generation is not about diminishing the founder’s legacy—it is about reinforcing it. By implementing a structured ownership transfer, family businesses can cultivate responsible ownership, reduce conflicts, and sustain long-term growth. In Part 2, we will explore practical strategies for executing a successful share sale within the family business, ensuring a smooth and fair transition for all parties involved.

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Join Us for Part 2 of Our Exclusive Real Estate Masterclass!

After the overwhelming success of our recent webinar, which brought together nearly 100 top developers, we are excited to present Part 2: Deep Dive into Strategies That Will Redefine Real Estate Selling in 2025.

Date: Friday, March 21, 2025 Time: 10:00 AM – 12:00 NN (via Zoom) Investment: PHP 1,800

Our last session gathered some of the most influential developers in the industry, highlighting the urgency and importance of understanding the evolving real estate landscape. Now, it’s your turn to gain the same insider knowledge!

In this masterclass, we will dive into cutting-edge market trends, strategic risk management, and innovative selling approaches to help you thrive in 2025 and beyond. Expect practical insights and expert strategies that will keep you ahead of the competition in an increasingly dynamic market.

Limited slots available! Secure your spot today by contacting Maica at +63 917 898 1493.

Don’t miss this opportunity to gain valuable knowledge, stay ahead of industry shifts, and elevate your real estate success!