Brendan O’Sullivan No Comments

When you run a business, probably one of the last things you want to think about is if one of your key people becomes ill or dies. And quite right too, you should be focusing on the future success of the business and where you next new customer is going to come from.

But trust us, it’s worth considering. Depending on the size of your business, it’s possible that there are only 2 or 3 people who are responsible for getting the business to where it is today. So if anything happened to one of these key individuals the impact would be significant.

Have you considered how your profits would be affected? If there are 2 key individuals on the board, they may each be contributing towards 50% of the annual turnover. In some cases there is one director responsible for sales and one responsible for operations. How would the business survive without one of these individuals?

And what about shares? The deceased’s shares will usually be passed to the beneficiaries, but:

  • Will they have an interest in the business?
  • Will they share the same vision as the other shareholders?
  • Will they want to contribute to the business?
  • Will they want to sell the shares?
  • If they do want to sell the shares, will the remaining shareholders have the funds to buy them?

For a situation such as a sudden death there are of course many unknowns. The good news is that there are things you can do to protect your business as much as possible.

  1. Key Person Protection : protect your business with life assurance that could provide your business with the cash injection it may need to help recover from the loss of a director and could cover loss of profits and the cost of recruitment and training for a replacement.
  2. Cross-option agreement: an agreement put in place whereby the surviving shareholders can buy the deceased’s shares. Having this agreement in place makes a difficult situation just that little bit easier.
  3. Shareholder protection: provides you with the cash you need to purchase shares that have been passed to the beneficiaries. This allows you to keep control of the business, but also helps to financially support the deceased’s family.

To find out more about how Core Financial can help click here to get in touch.