Corporate Financial Planning
Ashton Hoyle Independent Financial Advisers
offer a comprehensive portfolio of business finance
and support services for all corporate clients.
When was the last time you looked at your
business protection?
Failure to do so could lead to major problems!
If you are in business, failure
to protect your company, partnership and key members
of your staff could have disasterous implications in
the event that one of you dies prematurely, or
becomes seriosuly ill that you cannot work.
The following is a list of some
of the more common issues facing business owners and
shareholders:
Shareholding Directors of a
Private Limited Company
The death
or permanent disablement of a shareholding director
could have a serious impact, both on the future of
your business and your family. So what are the main
points you need to consider?
Majority Shareholders
Majority shareholders may have
important voting rights that directly affect the
running of the company. In the event of a majority
shareholders death, these rights will normally pass
to the deceased's dependants. This could affect the
company in two ways:
- The dependants now have the right to the say
in the running of the company, but probably
without the necessary skills and experience.
Will they share the objectives that the
surviving shareholders have for the business?
- They might prefer to receive cash for the
shares they have inherited, but who will buy
them? Unless the remaining shareholders have
sufficient liquid capital reserves, they may be
sold to a third party that is involved as a
competitor to the business
Minority Shareholders
Generally it is the voting rights
attached to a shareholding in a private limited
company that gives them a market value. Minority
shareholdings may not have sufficient rights and so
the shareholder's dependant's may inherit shares
that are virtually worthless. The only likely buyers
of such a holding would be the surviving
shareholders, but they may be under no obligation to
buy.
Shareholder Solution
The simple answer to both of
these scenarios is shareholder protection. A legal
agreement is signed by all the shareholders, who
agree to sell their shares in the event of their
premature death and an insurance contract(s)
provides money for the surviving shareholders in
order for them to buy the deceased shareholders
equity in the business.
Don't forget Key staff! Keyman
or Key Person
As the majority of businesses are
built around people, the continued success may also
depend upon the special contributions made by a
small group of key 'men' or 'women'. Fellow
directors or partners should also be classed as key
persons. The death or disability of any of them
could threaten the company's profitability. Indeed,
its future survival could be at stake.
Keyman Solution
The premature death of any key
employee is likely to cause an
immediate requirement for cash, so life assurance
should be a main priority. However, it is not just
the death of a key employee that can create serious
financial burdens on the company. Today many serious
illnesses, such as heart attack, stroke or cancer,
no longer result in death but require lengthy
periods of convalescence. A key person insurance
contract can be written on the lives of key staff
that would provide money for this eventuality.
Summary
If you are concerned that your
business may be in a vulnerable position should one
of these events happen to any of your key employees,
then please
contact us
for a total independent, professional and detailed
analysis of your business requirements. |
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