During the pre-IPO planning stage, most founders are focused on enhancing the companies’ performances, courting investment bankers and promoting the companies’ stories to prospective investors. While all of these activities are necessary, there is one key risk factor often overlooked by founders: their family situations. More importantly, founders should consider the role that trusts can play in mitigating risks and balancing business succession with family business affairs.
A high profile case of a founder successfully using a trust to protect assets involved Wu Yajun the head of Longfor Property and the wealthiest woman in Mainland China at the time. Ahead of her company’s landmark IPO in 2009, Wu strategically structured ownership of company shares within two separate family trust funds through HSBC International Trustee. When Wu and her husband Cai Kui divorced at the end of 2012, the strategic structuring averted any disputes over equity and the stock price did not see a significant fluctuation.