Succession Planning

Business Protection & Succession Planning

There are a number of different ways businesses can protect themselves in the loss of a partner, director, or key person to their business.

At Progressive Financial Services we ensure the most efficient and productive agreements are put in place by involving your accountant and legal aid; ensuring nothing is left to chance. It is important to review these arrangements annually as the business grows.

The different arrangements we can provide are:

• Personal Shareholder Protection
• Partnership Protection
• Corporate Shareholder Protection
• Key Person Insurance

Personal Shareholder Insurance

The shareholders enter into a personal agreement with each other to “buy out” a deceased shareholder’s shares in the event of his or her death.

To provide the funds to fulfill their personal obligation under the agreement each shareholder personally effects life assurance cover which is payable to the surviving shareholders on their death with no tax liability, if structured properly.

Partnership Protection

• Partnership Protection pays out a lump sum to buy the deceased partner’s share of the business, thereby ensuring that the remaining partner(s) retain full control of the business
• The deceased’s next of kin can rapidly realise the value of the deceased partner’s share of the business for a capital lump sum
• The remaining partners can inherit the deceased’s share of the business without incurring inheritance tax.

Corporate Shareholder Protection

• In this case the company enters into a put / call agreement with each of its shareholders to buy back shares from their personal representatives in the event of death. The company takes out a life assurance policy on each shareholder, to provide funds to enable the company to fulfill its obligation under the agreement
• The major advantage of the “Corporate” arrangement is that the cost is borne totally by the company - with no “BIK” implications for the individual shareholder
• However, this option is complex to set up due to the fact that certain company law provisions must be satisfied and formal approvals are required

Key Person Insurance

Key Person Insurance pays out a lump sum to the business in the event of death or serious illness of that key person. The main benefits are:

• Can help minimise interruption to business activity
• Can service any existing loans (personal guarantee)
• Can help provide resources to find a suitable replacement

Critical Illness

• Any death benefits can be coupled with serious illness benefits
• Protection for the business if one of the key players suffers a serious accident or illness.

Partnership Protection

• Partnership Protection pays out a lump sum to buy the deceased partner’s share of the business, thereby ensuring that the remaining partner retain full control of the business
• The deceased’s next of kin can rapidly realise the value of the deceased partner’s share of the business for a capital lump sum
• The remaining partners can inherit the deceased’s share of the business without incurring inheritance tax