Why the share split we recommended two years earlier finally happened

The situation

Sung-min opened the call the same way he had opened the first one two years earlier, more or less asking whether we had not already told him to do this. It was a fair question, and not an easy one to answer diplomatically. His wife Sanja owned and operated a group of franchise locations across the region, incorporated as a single company with combined revenue somewhere between $20 million and $60 million, built steadily over more than a decade of adding locations one at a time. Sung-min, a surgeon who also chaired a local not-for-profit hospital foundation board in whatever time surgery left him, held shares alongside her as a co-owner. It was that foundation board experience, not the franchise business itself, that had pushed the family toward formal governance in the first place: as the business grew past a dozen locations, Sung-min insisted the company adopt the same habits he relied on at the foundation, a documented board with an outside voice in the room rather than major decisions settled between spouses over dinner. The two of them formalized a three-person board to sign off on major structural decisions, with Sung-min sitting as chair alongside Sanja and the company's long-time accountant as the outside director, even though the operational side of the business had always been Sanja's domain day to day. Two years earlier, our office had recommended splitting their single class of common shares into a larger number of shares at a proportionally lower value each, to make it easier to eventually transfer smaller blocks to their two children without triggering an oversized valuation event on each transfer.

At the time, the advice had not felt urgent. Sanja and Sung-min were busy running an expanding business, their children were still finishing school, and a share split felt like a project that could wait. It waited. Two years passed, the franchise business grew considerably, and the value of each existing share climbed along with it.

The urgency returned when their eldest child, now working in the business in an operations role, asked when he would start receiving an ownership stake, a conversation Sanja and Sung-min had promised him would happen once he was established in the company. They realized the share split they had shelved was now the thing standing between that promise and reality, except the shares were worth considerably more than they had been when we first raised it, which meant transferring even a modest ownership percentage now carried a materially higher valuation and a larger tax footprint than the same transfer would have two years earlier.

Sung-min's question, stripped of its frustration, was really asking whether the delay had cost them anything real, or whether it had simply been a wasted two years that could now be picked back up exactly where it left off. The honest answer was that it had cost something, and the file would need to account for that rather than pretend the two years had not happened.

What the documents showed

The first thing we pulled was the memo from two years earlier, along with the share register as it stood then. The original plan had proposed splitting the company's existing common shares on a multiple basis, so that each current share became several shares of proportionally smaller value, creating enough granularity to transfer meaningful but not overwhelming ownership percentages to each child over time without needing fractional share transfers or awkward valuations on every step. The memo had recommended acting within a year, before the business's next growth phase pushed the underlying value materially higher.

Comparing that memo against the company's current financial statements showed the scale of what had changed. The business had added several new franchise locations in the two intervening years and revenue had grown enough that a fresh valuation would put the per-share value, even after applying the same split ratio originally proposed, meaningfully higher than the pre-split value had been two years earlier. In practical terms, transferring the same percentage of the company to their eldest child now would attract a larger deemed value under the Income Tax Act than the identical transfer would have attracted on the original timeline, a gap that only widened the longer the plan sat untouched.

The documents also showed something Sanja and Sung-min had not fully appreciated: because they had never executed the split, the company's share structure was still a single class of common shares, which meant any transfer to their children now, even a small one, would have to be valued and structured against the full undivided value of each share, exactly the problem the original split had been designed to avoid. Without the split, a transfer of even a modest stake risked either an outsized tax cost or a valuation dispute over what a fraction of a single expensive share was actually worth.

The good news buried in the documents was that nothing about the original plan had become unworkable. The split itself, mechanically, was exactly as available now as it had been two years earlier, since Ontario corporate law places no expiry on a company's ability to amend its articles to divide its shares. What had changed was not whether the plan could still be done, but how much value would already be embedded in the shares by the time it was, and therefore how much more the eventual transfers to the children would cost in tax terms compared to acting when we first suggested it.

What we did

1. Obtained an updated valuation of the company before doing anything else. Since two years had passed and the business had grown considerably, we needed a current number rather than relying on the original estimate, because every subsequent step, from the split ratio to the tax planning for the transfers, depended on knowing the real current value rather than the value from the shelved plan drafted years earlier.
2. Recalculated the split ratio against the new valuation. The original multiple no longer produced the same practical per-share value it had been designed to hit two years earlier, so we adjusted the ratio upward to bring the post-split share value back down to a level that would allow meaningful but manageable transfers to each child without either being priced out of a first stake in the family business.
3. Took the split to the board before filing anything. Sung-min, as chair, put the recalculated ratio to the three-person board for a formal resolution rather than treating it as a formality between spouses, giving the outside director a documented chance to ask questions before the structure changed. With that resolution and shareholder approval in hand, we filed the articles of amendment converting the single block of common shares into the larger number of proportionally smaller shares.
4. Brought in a tax advisor to model the transfer to the eldest child against current values. Because the underlying value had grown substantially, we worked with the family's accountant to structure the first transfer in a way that managed the tax cost as carefully as possible given the current starting point, rather than the considerably lower starting point the original plan had assumed when it was first proposed.
5. Documented the transfer to the eldest child working in the business. We prepared the share transfer and updated share register reflecting his new ownership stake, along with a simple shareholder agreement addressing what would happen to his shares if he left the business or if a disagreement arose later, a document the family had never put in place before despite years of informal understandings.
6. Set out a written timeline for transfers to the younger child. Rather than leave the second transfer as another informal intention that could sit for years the way the first plan had, we built a specific schedule tied to concrete milestones in the younger child's own path into the business, and recommended the schedule be revisited annually rather than left open-ended and easy to forget.
7. Flagged the cost of the delay directly in our closing memo. We did not soften the comparison between what the original plan would have cost the family two years earlier and what the completed plan cost now, because Sung-min had asked for that comparison directly and it was the most useful and honest thing we could give him going into any future decisions about the business.

The outcome

The share split went through and the first transfer to the eldest child was completed, giving him a real ownership stake in the business he had been working in and putting the family's succession plan into motion after two years of it sitting on a shelf. Measured against where the family wanted to end up, the file was a clear success: the structure now in place is exactly what was recommended originally, and it will support future transfers to both children without the valuation problems the single-class structure would have created. Sanja, who had approved the original plan two years earlier without ever formally revisiting it, said afterward that seeing it finally completed made the earlier delay easier to accept. The board's outside director, who had asked the sharpest questions at the resolution meeting, told Sung-min the delay was the kind of thing a board exists to catch, even if this time it had not.

Measured against what it cost to get there, the delay was real. The tax cost of the first transfer came in meaningfully higher than our original two-year-old projection had estimated, a direct consequence of the business growing in value while the plan sat unused. Sung-min did not dispute this once he saw the comparison laid out; he had asked the blunt question at the outset because he suspected the answer, and the documents confirmed it rather than softened it. Nobody on the file pretended the additional cost was avoidable in hindsight, since the business could not have been paused to wait for the family's schedule to catch up with the advice.

What the family kept from the delay was time to be more certain the plan was right, since two more years of watching their eldest child grow into the business had only confirmed that transferring him a stake was the correct decision, something that was somewhat less certain when the original advice was given. That does not offset the additional tax cost, and we told Sung-min as much rather than framing the delay as a hidden benefit dressed up to make the number easier to swallow. The plan for the younger child now sits on a defined timeline rather than an open-ended intention, which was the one change from the original advice that the family adopted without hesitation the second time around, and the one Sung-min said he wished had been in writing from the very first conversation.

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