The news that a large Quebec company was being sold rekindled the debate on the protection of our head offices. This is both an emotional and economic issue.
We discuss, we document, we question, and rightly so. It’s awkward for a government to get involved in an international and local economic situation where caution is usually de rigueur.
In the context of multinationals, protecting head offices proves to be complex.
Implementing protective mechanisms, such as giving more power to directors in a hostile takeover or limiting the voting rights of “travelling” shareholders, could be efficient solutions to discourage foreign investors. However, knowingly erecting obstacles to transactions could make Quebec businesses less attractive, thereby decreasing their value.
Delicate succession situation
While it’s essential for us to ponder such issues, they shouldn’t overshadow our responsibility concerning the delicate situation of our entrepreneurial succession. With the thousands of SMEs that must find a buyer, without which they’ll be forced to close, the issue of protecting Quebec head offices takes on another dimension we’d be remiss to ignore.
Quebec needs to take a two-pronged approach and tackle both the aspects impacting Quebec company takeovers and the under-investment in modernization that occurs in the years preceding a business transfer. These two issues are threatening a large number of organizations.
The baby-boomers who gave Quebec an unprecedented entrepreneurial edge are approaching 60. They may not be as well-known as Serge Godin or Alain Bouchard, but the 98,000 business owners who are planning on retiring by 2020—with only 60,000 to fill their ranks—will have a huge impact on the economy of Quebec and its regions.
The thousands of business transfers are an opportunity to promote the implementation of strategic initiatives by buyers based on innovation, global marketing, digitization and the modernization of facilities, to be even more competitive.
How to support passing the torch
The Quebec government has the flexibility and tools needed to make passing the torch easier and to support the efficient pursuit of business for buyers. It could implement a fair tax incentive for entrepreneurs to enable their children to take over the family business or provide the proper resources to efficiently plan the transition to the next generation.
It’s also necessary to implement tax treatment to enhance the capital gains exemption on business transfers by promoting sustainable and intergenerational businesses. We need to double down on our efforts to reduce the weight of administrative constraints that make businesses less competitive by adding costs that don’t necessarily create value.
A financial services firm, caterer, construction company and dry cleaning chain are small head offices that play big a role in revitalizing Quebec’s many regions. As big decision-making centres, they use professional services, take out advertising, buy locally, train and hire staff, and get involved in the community on their own scale. End to end, the contribution of such businesses is just as significant as large international head offices, and we need to take notice with as much passion.
Open letter published in La Presse + (May 29, 2016 issue)