Helping my Clients protect their business is vital in today’s market conditions. All too often the impact of an enforced change of ownership or loss of a ‘keyperson’, through illness or death, can have a devastating effect on a business. This can often be overlooked and the disruptive and monetary consequences could have a huge impact on a business.
A ‘keyperson’ is any employee with specialist skills or particular responsibilities. For example:
• Sales manager.
• Finance director.
• Production manager.
• Export director.
• Top salesperson.
• Chief designer.
• Marketing director.
It is normal business practice to provide a contingency fund to ensure that the company will still make profits even if the individual responsible for generating those profits is not around.
Once you have identified who the keyperson/people are within a company it should be easy to highlight the need for business assurance. Imagine a scenario where the keyperson drives a rather nice company car. On the way to the office yesterday he/she was involved in an accident, with the car being a total write-off and the keyperson unfortunately being killed. Ask yourself:
1. Which loss will have the most immediate impact on the business?
2. Which one of the two assets could be replaced by 9:00am tomorrow morning with a newer and better model?
If it makes sense to insure the easily replaceable, non-income producing assets of a company, doesn’t it make sense to ensure that the income and profit-producing assets of the business are insured too?
How many businesses insure office equipment (etc) for their full replacement value, but neglect to insure their most valuable assets (their key staff) at all!
Does your company have a Will?
In other words, an arrangement which will control where your shareholding goes on the death of the shareholders, and equally importantly where their co-shareholders’ interest would go? Obviously a ‘Company Will’ is not a document like a personal Will. It is nonetheless a very effective way of expressing what a Share Protection Purchase Arrangement is, in words that are easily understood.
What would happen to your business if a director, who is also a shareholder, dies?
1. Could your business afford to buy the shares?
2. Would the deceased’s family be left with an unwanted share in the business?
If the deceased’s family gain significant control over the direction of the company but have no aptitude for the business, this is likely to financially disadvantage the partnership/business.
A ‘Company Will’ protects the interests of co-owners of a business and family members in the event of the death of a partner or director/shareholder.
A ‘Company Will’ ensures that:
1. Capital is available immediately for share purchase or to pay off specific loans or other debts. This should be arranged in line with each partner’s shareholding.
2. Control of the business remains where it is intended and ensures business continuity.
3. Protection for dependants of the partners/directors.
