Family Investment Companies – what are they and how can you use them?

Family Investment Companies (FICs) – A Powerful Tool for Wealth and Succession Planning

A Family Investment Company (FIC) is a private limited company typically established by family members to manage, grow, and protect family wealth. Often used for long-term financial planning and succession planning, FICs allow families to hold assets efficiently while retaining control. The appointed Company Director, commonly a parent, maintains control over investments and decisions, reinvesting to build wealth for future generations.

How Does a Family Investment Company Differ from a Standard Limited Company?

Legally, a Family Investment Company is similar to any other limited company. The key distinction lies in its purpose, FICs are specifically used by families to manage investments and protect assets. These companies can invest in stocks, property, bonds and other financial instruments in a tax-efficient way.

While an FIC can be run as an unincorporated entity, incorporating as a Ltd company offers additional benefits, such as enhanced asset protection, tax efficiency, and flexibility in control and succession.

Why Are Family Investment Companies Used?

FICs are valuable tools for wealth management, estate planning, and intergenerational succession. Key reasons families use FICs include:

• Tax Efficiency – Profits are taxed at the corporation tax rate, which is generally lower than personal income tax.
• Control and Flexibility – Families can issue different types of shares with tailored voting rights, allowing parents to retain control while gradually transferring wealth.
• Asset Protection – Assets within an FIC are more secure from external claims and can be structured for bloodline succession.
• Succession Planning – FICs are ideal for passing wealth to the next generation in a structured, tax-advantaged way.

Benefits of a Family Investment Company

• Central to Estate and Succession Planning
  Retain control over family wealth during your lifetime and avoid leaving everything solely through inheritance.

• Collective Investment Management
  Families can invest as a group, with the director making decisions, and shareholders enjoying returns.

• Wealth Preservation
  Capital is not easily withdrawn, ensuring long-term retention within the family.

• Tax Advantages

  • Corporation tax on profits (lower than personal rates)
  • Shares can be gifted to children, potentially reducing Inheritance Tax (IHT)
  • Dividends can be paid tax-efficiently, depending on the recipient’s tax band

• Flexibility & Control
  Control is maintained by the founder, and custom share classes allow tailored rights and responsibilities.

• Asset Protection & Bloodline Succession
  Family assets are shielded from external claims (e.g., divorce), and ownership can be structured to remain within the family.

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Drawbacks of Family Investment Companies

• Complex Setup
  Professional legal and tax advice is essential for proper structuring and compliance.

• Regulatory Compliance
  FICs must follow corporate governance standards, including annual filings and financial record-keeping.

• Double Taxation Risk
  Dividends may be subject to corporation tax and dividend tax when distributed.

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Family Investment Companies vs. Discretionary Trusts

FICs are often compared to Discretionary Trusts as estate planning tools. Here’s how they differ:

Is an FIC Right for You?

Family Investment Companies have become a popular alternative to traditional trusts for families seeking flexibility, control, and tax efficiency. As a key part of your estate planning strategy, an FIC can help safeguard wealth for generations.

If you’re interested in exploring how a Family Investment Company can support your financial goals, contact our Trust Planning Team at OCG Legal at privateclient@ocglegal.co.uk.