Get in Touch Menu

Overview: Family investment companies

03 August 2023

A growing trend of late has been the increasing use of family investment companies. Our corporate & commercial team gives an overview of what they are and their benefits.

What is a family investment company (FIC)?

A FIC is most commonly a private company limited by shares which has been specifically created by one generation of a family to accumulate wealth and facilitate passing it on to the next generation in a tax efficient way.

The share structure of a FIC and its constitutional documents (its articles of association) are specifically tailored to suit the family’s needs and objectives. Very often the ‘founding generation’ will wish to retain control of the FIC and its funds. This is usually achieved by that generation retaining control by holding the shares with voting rights and appointing themselves directors. This enables them to determine when, how and if funds can be passed down to the next generation.

Why use a FIC?

The answer to this question would itself merit an article. With detailed financial and legal advice, a FIC can be a vehicle to accumulate wealth and manage the succession of that wealth to the next generation, whilst mitigating tax exposure (particularly in relation to inheritance tax) and retaining the flexibility to provide financial assistance to the next generation as the need arises.

For example, a FIC will typically have in issue different classes of shares to different generations or to specific individuals. This enables the founding generation (if they are directors of the company) to have flexibility as to when and if to declare dividends and to which class of share, thereby enabling them to help different shareholders at different times and with different amounts. Income can also be drawn by way of a salary to directors or by way of debt (essentially by withdrawing cash from the company in the form of interest or loan repayments).

Is it different to a discretionary trust?

Yes. Advice should always be sought to ensure the most appropriate structure is selected for what is trying to be achieved.

In very general terms, a discretionary trust can be better for small funds or for holding assets for beneficiaries not yet born or identified, whereas a FIC can be more beneficial to hold large capital sums and make long term investments whilst producing an income for shareholders. Detailed financial and legal advice should always be obtained.

How is a FIC set up?

Either by incorporating a new company in the same way as for any new company or by converting an existing company – although this could bring its own tax implications so – as detailed above – financial and legal assistance should be sought to ensure the most appropriate structure is adopted to facilitate the parties’ aims.

Our highly rated corporate & commercial team will be willing to help if you have any questions about family investment companies. Please get in touch.

Contact us

Our corporate & commercial team is rated by national legal guides The Legal 500 and Chambers UK. The department’s expert lawyers can help businesses big or small on a variety of corporate challenges that may arise.

Disclaimer: All legal information is correct at the time of publication but please be aware that laws may change over time. This article contains general legal information but should not be relied upon as legal advice. Please seek professional legal advice about your specific situation - contact us; we’d be delighted to help.
Helen Howes LLM
Associate, solicitor
View profile
Related services
Share this article
Resources to help

Related articles

Changes to company law – what businesses need to know


This week, initial changes to company law – including the biggest changes to Companies House since it began – will start to take effect. Here, our corporate and commercial team…

Chris Wills LLB (Hons)

Act to combat economic crime has received royal assent


Earlier this year we reported on the register of overseas entities, which was created under the Economic Crime (Transparency and Enforcement) Act 2022. This move formed part of a significant…

Chris Wills LLB (Hons)

Companies House: The impact of late filings


For any business whether large or small, effective governance is crucial. One of the fundamental principles of company law is that a company is a legal entity separate from its owners and…

Chris Wills LLB (Hons)
Contact us