Entrepreneur Series - Transparency is a Major Step to Family Legacy Succession

Passing on their achievements to future generations is a dream for many Asian entrepreneurs. Yet according to HSBC’s 2016 report The Essence of Enterprise, in Asia and Middle East, only one-third of second-generation entrepreneurs join the family business.

A snap poll conducted at the HSBC Private Banking’s Entrepreneur Series, titled ‘Building Futures—Turning Today’s Dreams into Tomorrow’s Legacy’, pinpointed a lack of communication as a major cause of why only one in three second-generation entrepreneurs join the family business 1. Younger generations say that ‘money and succession’ are the most difficult topics to discuss with parents.

Connie Ho, Head of Family Governance and Family Enterprise Succession, North Asia, at HSBC Private Banking highlighted that families usually wait until their plans have been finalised before discussing succession matters. But for the Cheng and Lo families — the respective founders of Polygroup and Crystal Group, Hong Kong-based manufacturing companies — open communication, which began years prior, enabled the patriarch and younger generations to find a common ground and implement their succession plans.

First generation: communicating their thoughts

Kenneth Lo, the founder of market-leading garment manufacturer Crystal Group, left the option open to his successors. “I made it clear early on that it was their decision to make,” he said. “If they were keen to join the family business, they needed to show their passion in the business, their ability to manage it, and their commitment to the corporate culture,” he added. To ensure the enterprise’s longevity, the family agreed that the enterprise should be managed by non-family members, with upcoming generations owning it, learning to be good shareholders and better yet, becoming the leaders.

According to Lewis Cheng, Polygroup’s third-generation leader, “High transparency is a crucial trait of my family.” This, he asserted, helps secure a family’s succession plan and a roadmap for the future.

Next generation: speaking their mind

Of his own accord, Lewis Cheng joined Polygroup after spending a few years working in the banking industry. “The family business is the best platform for me to achieve the most in the shortest amount of time,” he enthused. When he communicated his decision to his father, Paul Cheng, Lewis Cheng recalled, “He questioned and challenged it, making sure I knew I was serious and responsible for it. But in the end, I was the one that made the final decision.”

Andrew Lo, son of Kenneth Lo and current CEO of Crystal Group, was unfamiliar about garment manufacturing, as his interests lay in other areas. His father said to him, “No matter what you sell, all business is about strategic planning and people management.” This convinced Andrew Lo to join the family business, where he eventually identified his missions and goals, including a succession plan tailored for the company’s next leader.

For more insights on how to cultivate transparency and open communication in the family business, watch the Lo family and Cheng family share their thoughts.

1HSBC Private Banking 2016 Essence of Enterprise Report

Back to top Back to top

Disclaimer

This document is produced by HSBC International Trustee Limited, a non-bank member of the HSBC Group.

The contents of this document are not and should not be construed as an offer to sell any investment, instrument or service. Furthermore, this document does not constitute the solicitation of an offer to purchase or subscribe for any investment, instrument or service in any jurisdiction where, or from any person in respect of whom such a solicitation of an offer is unlawful.

The information contained in this document has not been reviewed in the light of your individual circumstances and is for information purposes only. It does not purport to provide legal, taxation or other advice and should not be taken as such. No client or other reader should act or refrain from acting on the basis of the content of this brochure without seeking specific professional advice.

This document is not for distribution in the USA.

No part of this brochure may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission of HSBC International Trustee Limited.

HSBC Private Bank is the principal private banking business of the HSBC Group.

Private Banking may be carried out internationally by different HSBC legal entities according to local regulatory requirements. Different companies may provide the services listed in this document within HSBC Private Bank or other members of the HSBC Group.

Some services are not available from certain locations.

Some HSBC Offices may only act as representatives of HSBC Private Bank, and are therefore not permitted to sell products and services, or offer advice to clients. They serve as points of contact only. Private Wealth Solutions products and services are marketed by Wealth Planners who may be located in either a bank or non-bank entity of HSBC Private Bank. Please refer to your local Wealth Planner for further information.

‘Private Wealth Solutions’ is the marketing name for HSBC International Trustee Limited and its affiliates. HSBC Private Bank is the principal marketing name for the HSBC Group’s international private banking business.

In the UK, HSBC Private Bank (UK) Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority.

In Jersey, HSBC Trustee (C.I.) Limited and HSBC International Trustee Limited, Jersey Branch, are regulated for Trust and Insurance Mediation Business by the Jersey Financial Services Commission. HSBC Trustee (C.I.) Limited is licensed to perform services under the Foundations (Jersey) Law 2009.

In Guernsey, HSBC Trustee (Guernsey) Limited is regulated by the Guernsey Financial Services Commission in the conduct of Fiduciary Business.

In Luxembourg, HSBC Private Bank (Luxembourg) S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF).

In Hong Kong, HSBC Trustee (Hong Kong) Limited is registered as a trust company under the Trustee Ordinance of Hong Kong and is a non-bank member of the HSBC Group.

In Switzerland, HSBC Trust Company AG is part of the consolidated supervision of HSBC Private Bank (Suisse) SA, of which it is a subsidiary, by the Swiss Financial Market Supervisory Authority (FINMA) for Anti-Money Laundering purposes. Private Banking is carried out by HSBC Private Bank (Suisse) SA, an authorised bank regulated by the FINMA.

In Singapore, HSBC Trustee (Singapore) Limited (Reg No. 194600098Z) and HSBC International Trustee Limited, Singapore Branch (Reg No. F03767D) are holders of trust business licences issued by the Monetary Authority of Singapore.

HSBC International Trustee Limited and its affiliates also provide fiduciary services in the British Virgin Islands. These entities are regulated to the extent that their local jurisdictions require.

©Copyright. 2016. HSBC International Trustee Limited.

ALL RIGHTS RESERVED.