IFA Financial Advisers Nottingham

Solutions for Business - Business Succession

The loss of a partner, member or shareholding director can have a major impact on the success of a business in terms of ensuring continued control for the remaining owners.

However, we also need to think of the effect on the dependants of a deceased owner, or the position of a critically ill owner who might wish to leave the business.

Every day shareholders and directors take steps to protect and grow their businesses – from employing and retaining the best staff, through to listening to their customers’ requirements and insuring their business assets such as property and equipment.

Decisions are made on a daily basis to protect the future of the business.

• But have they overlooked themselves?
• What is the potential impact to the business if a shareholder director dies or suffers a critical illness?
• Will the company be able to continue trading?
• Would the surviving spouse or beneficiaries wish to remain involved?
• What would the remaining shareholders want?
• Would the surviving spouse wish to sell to a third party?
• Could the remaining shareholders prevent that?

In these unfortunate events, the potential damage to the business could be significant and unknown. Having adequate provision in place could help resolve these issues by preparing and planning for the unexpected.

How long do you think a business would survive if it lost a Shareholder or Key Person?

Not as long as you might think as the failure rate is frightening; 17% collapse in month one, 6% one to three months, 15% four to six month, a further 15% six month to one year and only 47% survive longer than one year. (Source: Legal & General Protection Survey 2003).

Proceeds received from business protection plans can be used to buy out a shareholder following a critical illness or their family on death.

A shareholder protection arrangement ensures that proceeds are available when required, on death and/or critical illness of a shareholder, to ensure a speedy conclusion to the succession problem.

The sudden loss of a key shareholder can disrupt a company, but shareholder protection will minimise this interruption to the business. The shareholder or their family will quickly receive the true worth of their shares to alleviate these anxious times.