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Business Succession Planning

The most important factor in the success of any business is its people.  What happens when key people die?  Ensuring a smooth transition in ownership and leadership of a business upon the death or retirement of an owner or key person is critical to the ongoing success of that business.

Call Byron Cannon today on 1800 640 509 or email byron@fclwayers.com.au.

What is a Business Succession Plan?

A Business Succession Plan, or Business Will is a pre-agreed strategy to enable a partner or shareholder in a business to exit the business on retirement, death or total and permanent disability (or some other defined event such as trauma etc). The terms of the Agreement are outlined in a Business Succession Agreement, or Business Will.

What type of events does a Business Succession Plan deal with?

A Business Succession Plan deals with a number of events that may happen in the future to the proprietors of a business including:

• Death;
• Total and permanent disablement;
• Extended illness;
• Retirement
• A breach of an agreement or business relationship such as bankruptcy
• Criminal sentence
• Reaching a certain age

The most common events dealt with in a Business Succession Plan are retirement and death.

Why do I need a Business Will?

If you were to die, would you like your spouse or beneficiaries to be in a business that they know very little about, and in partnership with someone that they may not know very well?

Also would you like to ensure that if you were to die or retire, that the hard earned asset built up in your business is property valued and paid to you, or your beneficiaries?

If these questions have raised some concern, you need a Business Succession Agreement or Business Will.

Resolve problems before they become problems

Every day there are disagreements between partners of businesses as to how a business can be valued in the event of death or retirement. A properly drafted Business Will will take the guess work out of this process and will set a definite predetermined process in relation to the exit of a partner/shareholder in a business.

Negotiating a Succession Plan

Depending on the circumstances of the Succession Plan (i.e the buyout by the partners into the future, or the death of a partner) the negotiations for a Business Succession Plan may differ.

It is very important to have a Solicitor involved at an early stage to provide guidance as to the important issues that need to be addressed within a Business Succession Agreement.

Buy/Sell provisions in the Business Will

Within the Business Will options can be granted to the deceased, and surviving parties, to ensure a smooth transition of ownership. These are referred to as Buy/Sell Options and are contained in the Business Will itself.

Funding a Buyout through Insurance

Often it is the case that if a business partner dies, the surviving owners may not have the access to funding to buy them out.  This can place unnecessary financial pressure on the business and surviving owners.  A simple and effective way to ensure that the appropriate funds are available is to have insurance policies in place to cover events such as death, total and permanent disablement, and trauma.

Ferguson Cannon Lawyers have an experienced team of Lawyers that will be able to assist you with all of your requirements for Asset Protection and Business Succession.  For any further queries please do not hesitate to contact Byron Cannon, Director, on 1800 640 509, or email byron@fclawyers.com.au.