Business Contingency & Succession Planning

Address

20 Warners Road,

Newton Longville, Buckinghamshire, MK17 0BL

Telephone

01908 985046

Business Continuity & Sucession Planning

For business owners, when you consider that business shareholdings can often be a significant, if not largest, proportion of your legacy estate.  It is therefore essential that you consider the following:

  1. Have you made provisions to ensure that your business passes tax efficiently to your family as part of your legacy estate planning?
  2. Have your co-shareholders made provisions to ensure that your share value is passed to your family?
  3. Have your co-shareholders also made provisions to ensure that your family give their share back to the business and not to sell to a third party or get involved in the business?

Research in Legal & General's and Institute of Directors' 'State of the Nation's SMEs Report in 2018, found:

  • 47% of SMEs have left no instructions in their will or special arrangements regarding shares in their business
  • Many have never thought about it
  • 37% of shareholders stated they would buyback owner’s shares - having never considered how they would raise the funds
  • Some said they would use personal wealth to do this, but confirmed they could not afford to at this time. Could they do so in the future?
  • 66% of limited companies and 75% of partnerships have not reviewed their partnership agreements or articles of association in the past year
  • 38% have never reviewed them
  • 39% of business owners expected their business to fold within 18 months of the death or critical illness of a key person


Considering this, how would this effect your business?  Have you considered the impact?


There are many solutions to resolve this business continuity and succession planning.


Shareholders Agreement (SA) – these are essential for any business and need to be review regularly.  With a robust a professionally drawn up SA in place, shareholders rights and obligations will be agreed, rules put in place regarding the sale and transfer of shares, protection for minority shareholders will be provided as well as a structure to resolve disputes.


Cross Option Agreement (COA)– if a shareholder passes away a Cross Option Agreement would allow shares to be bought from the deceased estate to enable the existing shareholders to keep control of the business.


Business Protection Insurance (BPA) - provides the funds to ensure business continuity in the event of a shareholder dying or becoming seriously ill.


There are two options:


  • Option 1 - Each individual director can affect a Business Protection Plan on their own life, subject to a Business Trust for the benefit of their co­-shareholders.
  • Option 2 - The company can affect a Plan on the life of the shareholder for its own benefit. No Trust will be needed


The cover amount should be the value of each individual’s shareholding and review every 3/4 years.

Business Powers of Attorney – Have you thought who would run your business if you were incapacitated by accident or illness?  Unless you appoint an Attorney, everyday business operations may not be possible; access to bank accounts may be denied, suppliers and salaries might not get paid and the disruption to your company could be catastrophic!

Copyright © All Rights Reserved