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Estate Freeze (Gel successoral)

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Term Definition
Estate Freeze (Gel successoral)
When a company is sold or transferred, the shares of the owner-manager are valued, and this value is determined and set at a specific time. Following this, a new definition of the owner-manger’s shares and a redistribution of equity among the new owners of the company occurs. Several methods are used to institute a freeze and each method has its particularities. The “classic” method entails a transfer of the owner-manager’s shares to a management company that becomes the owner of the company. The management company issues new, non-participating shares to the owner-manager in exchange for his old shares. The value of the new, non-participating shares will be equivalent to the value determined for the old shares at the time of the freeze. Usually, the new, non-participating shares are controlling shares. The management company will also issue new participating shares to the designated beneficiaries of the estate. The new participating shares are the shares that will benefit from the increase in the company’s value in the future. In setting the value of his shares at the time of the freeze, the shareholder sets the amount of the capital gain that he will realize on his new, non-participating shares. The tax on this capital gain will be payable upon disposition of the shares.
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