Family Business Succession Planning in Hungary – Legal Guide by Dr. Éva Torma

Succession Planning for Family Businesses – Why It Matters for the Future

Family businesses are the backbone of the Hungarian economy – nearly 70% of all domestic companies operate in this form.
They don’t just create jobs but also pass on values, traditions and responsibility from generation to generation.
That’s why it’s crucial to ensure how the company’s future will be secured when the founder can no longer actively lead it.

In this guide, we present how a family business can prepare for succession – the legal, organisational and human steps necessary to ensure that the founder’s life’s work continues successfully.

1. Why Family Businesses Are Indispensable – and the Challenges They Face

In family businesses, ownership, decision-making and daily operations are usually concentrated in the hands of one family.
This brings commitment and a long-term vision – but also a major risk: what happens when the founder is no longer able to lead?

Key facts:

• Family businesses generate 70–90% of global GDP.
• In Europe, around 70–80% of all companies are family-owned; in Hungary, about 70%.
• Most operate in construction, trade and agriculture.

A family business is also a community of values – built on trust, responsibility and continuity.
This makes succession one of the most sensitive yet essential decisions a business will ever face.

2. Generational Change – Why Now Is the Time to Act

Many Hungarian family businesses founded after the political transition are now led by founders reaching retirement age – meaning that tens of thousands of companies face succession within the next few years.

According to international statistics:

• Only about 30% of family businesses survive the first generation transfer,
• 10–15% make it to the second,
• and only 3–5% reach the third generation.

The main reason: lack of preparation.
If the founder suddenly steps away, the business may lose leadership, the inheritance process can stall, and operations may cease.
In contrast, proactive succession planning creates security, continuity and value preservation.

3. How to Build a Successful Succession Plan

Succession planning is not a single document but a complex process involving strategic, legal and personal decisions.
The goal is to keep the company and family values aligned while ensuring operational stability.

Main stages of succession planning:

1. Assessment of family and asset situation: what belongs to the business, who is willing and capable to take over, and what expectations exist within the family.
2. Legal and risk assessment: the lawyer and tax advisor analyse potential risks and recommend optimal structures.
3. Drafting the succession plan: defining a detailed plan based on family goals and values.
4. Legal implementation: preparation of contracts, founding documents and a family constitution.

Internal and external solutions:

• Internal succession: when a family member is suitable, a gradual transfer, shareholder agreement and leadership training ensure continuity.
• External solution: if no successor is available, the company can be handed over to management or sold, with a legally and financially prepared structure.

Modern legal tools:
trust structures, asset management foundations or key-employee shareholding – all designed to secure the company’s stability in the long run.

4. The Human Side of Succession – Communication and Trust

Legal steps alone are not enough: a succession is only successful if there is open communication and mutual trust among family members.
Everyone should understand the goal of the process and have a voice in decision-making.
Transparency helps prevent future conflicts.

Often, involving an external advisor or mediator helps guide the dialogue and align decisions with family values.

Why Start Succession Planning Now?

A family business is more than a company – it’s a legacy and a life’s work.
A well-structured and legally secure succession plan ensures that this legacy is not lost during a generational transition.

Dr. Éva Torma, Attorney-at-Law, assists at every step of the process – from corporate restructuring to drafting a family constitution.
Timely decisions protect both the founder’s work and the family’s shared values for generations to come.