The loss of a business partner or shareholding director can have a major impact upon a business and can potentially threaten its future success.

Additionally, without prior planning and appropriately worded business documents, unnecessary complications may arise for the dependants of the deceased owner.

For example:

• Beneficiaries may wish to sell the share in the business they have just inherited. The remaining owners of the business may have no control over who these shares are sold to.

• Depending upon the percentage of shares owned, the deceased owner’s beneficiaries could force the outright sale or winding up of the business.

• The deceased’s beneficiaries may wish to become involved in the business. Have they the relevant experience and skills to replace the deceased owner/ shareholder and how will they interact with the remaining owners/ shareholders?

• If the remaining shareholders do wish to purchase the shares from the deceased’s estate do they have sufficient funds to do this and, if not, where will they obtain them from?

• If beneficiaries were to sell the shares in the business, the cash received into their estates is potentially at risk from tax due on their death, creditors, divorce settlements and paying for the cost of long term care.

With appropriate advice, arrangements can be made to protect business owners and shareholders to provide for either a smooth exchange of company shares or the interest in the business passing to the surviving shareholders/ business owners thereby protecting the legacy for the claimant’s beneficiaries.

The Strategy

Our business protection strategy involves drawing up a Business Continuation Agreement between all the shareholders, supported by a series of life assurance plans and trusts. The Continuation Agreement sets out the terms for the disposal of the shares. The life assurance policies provide the finance for the other shareholders/ business owners to purchase the deceased’s shares/ interest in the business. Finally the trusts ensure the proceeds of the life assurance policies are paid immediately and as tax efficiently as possible to the right people without placing the funds at risk from third parties.

Cornerstone can put in place the financial protection your business will need so that none of the business owners need worry about when one of the owners/ shareholders dies what might happen to the business or how their respective beneficiaries can gain access to the value they have worked so hard to create.