When Giorgio Armani passed away at the age of 91, the legendary Italian fashion designer and founder of the Armani empire, left behind more than a valuable multinational – he left a carefully scripted succession plan for the luxury-goods business he had built since 1975.
In his will, Armani instructed his heirs to sell off stakes in the company gradually. He set specific timelines and even named preferred buyers, such as Louis Vuitton Moët Hennessy (LVMH) and L’Oréal.
Since his death, the Armani directives have been making international headlines for the detail they contain and the thought that went into them. Armani’s instructions also offer valuable lessons for South African business owners who want to ensure that their companies – small, medium or large – are preserved and not left in the lurch by a lack of succession planning, or torn apart by legal complications.
Capital Legacy National Manager of Succession Planning, Ken Newport, says the main reasons for delays in wrapping up business owners’ deceased estates in our country, often relate to the absence of clear instructions. This could include a succession plan, financials not being up to date, no valuation or buy-and-sell agreement being in place, and tax returns not filed with SARS. So, while the example of Giorgio Armani would not apply in its entirety within our South African legal context, Newport says his legacy includes some valuable lessons.
- Include your business in your will.
The bequeathing of shareholding in your business should be included in your will, provided there are not buy-and-sell contracts in place. However, prescribing what should happen to your business assets (for example, selling equipment) should not form part of your will – these are matters for the business and its governing documents, not the winding up of your estate.
- You can have multiple heirs, but consider it carefully.
You can leave your business to multiple heirs, but do so with care. You can prescribe the shareholding percentages being left to each person, but you should also take into account whether the person will actively participate and be involved in the daily running of the business, or if they will only be a passive shareholder.
If you are considering leaving shares equally to your children, bear in mind that they may have different levels of interest or ability and this could cause practical challenges or even legal disputes if they cannot come to an agreement that suits all parties. This can seriously harm the profitability of the company and its long-term feasibility.
- Don’t set timelines – to avoid ‘ruling from the grave’.
Armani directed his heirs to sell 15% within 18 months, and more within three to five years. In South Africa, such strict timelines could be seen as ‘ruling from the grave’ and would most likely be frowned upon by our courts. Instead, rather provide flexibility by empowering your executors, directors, and shareholders to act and respond to circumstances that may arise after you have passed away.
- Don’t be rigid.
Armani even went as far as listing preferred buyers for his company. While this level of control might suit a global empire, in South Africa it would be wiser to create a business succession plan that includes:
- Shareholder or buy-and-sell agreements
- Life cover to fund buyouts
- Key person insurance
- Plans for succeeding directors and shareholders
This would ensure that your business can continue running without holding up the deceased estate administration process.
- Values, guidance and principles are not binding.
Armani described the independence of his brand as ‘an essential value’ in his will. If you feel this strongly about a certain value, principle or rule that you would like to be applied after you’re gone, you can include it as part of your ‘wishes’, but it will not be legally binding or enforceable. Rather focus on your succession plan and corporate documents, not how you want the company to be run – this should ultimately be in terms of your succession plan.
Key takeaways
The Armani estate plan was detailed, ambitious, and public. For South African business owners, its lessons are clear:
- Keep your will focused on shareholding.
- Use shareholder agreements and succession plans for business operations.
- Avoid rigid timelines and being overly prescriptive.
- Communicate your preferred principles and wishes, but let governance documents carry the legal force.
Whether you own a multinational empire or a family business in a small town, careful estate planning by way of a clear succession plan will ensure that your business continues being successful long after you’re gone, extending your life’s work and making your legacy last.
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