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Business continuity planning

Business continuity planning. Identifying Key Person Cover opportunities. October 2013. Business continuity planning. The need for Key Person Cover. Identifying key people The issues Identifying the problem The solution Why PruProtect for Business Protection.

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Business continuity planning

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  1. Business continuity planning Identifying Key Person Cover opportunities October 2013

  2. Business continuity planning The need for Key Person Cover • Identifying key people • The issues • Identifying the problem • The solution • Why PruProtect for Business Protection Annual business failures predicted to be approximately 24,900 before the end of 2013 - 12% above the 2010 figure. BDO Business Pulse, 2013

  3. Customers to look for Within a company there may be many key individuals • Owners • Managing Director • Sales Directors • Production Managers • Research & Development staff • Designers • Specialist skills • Technical experts • Finance officers We offer a Business Protection fact find to help you gather the relevant information

  4. The issues Which of the following would damage a company most? • Someone steals the computers • The photocopier blows up • One of the directors suffers a heart attack • The courier lets them down • A window is broken by vandals • Shareholding director dies • A company car is stolen • The telephone/data lines go down

  5. The issues Every two minutes someone is diagnosed with cancer in the UK1 Every year an estimated 152,000 people in the UK have a stroke2 300,000 people have a heart attack in the UK alone3 1.Cancer Research UK, 2013. 2. The Stroke Association, 2013. 3. nhs.co.uk, 2013.

  6. The problem How would a company trade if a key director died or suffered a serious illness? Cash flow Credit control Cost control Forecasting Loans / Capital tax Company Secretary Vision Direction Leadership Board cohesion Bank confidence R&D Quality control Buying Projects Contracts Team leader Connections Product & market Negotiating Team leader Exports

  7. Key Person Cover Ideal questions to ask Who is missed most when on holiday? Could the company replace their knowledge, skill or attributes? Would it affect business expansion or development? Would it result in loss of goodwill or hardening of supplier credit terms? Would you miss their administration management contribution? Replacement time, successors available? What view would your bank take? Would it leave you vulnerable to competitors who may be able to exploit the situation? Be specific - there are usually one or two key people at the most

  8. What, why and who Fundamentals - keep it simple • Identify what type of business structure you are dealing with • Identify why the proceeds are required • The company will receive the proceeds • Ensure protection is set up correctly. We can help on individual cases.

  9. Partners as key people Premiums – not deductable Sum assured – usually tax free • When Partners are key…? • Remember a partnership is not recognised as a separate legal entity, except in Scotland • Each partner takes out their own policy under business trust • Surviving partner(s) make loans to the business to cover the business need A P Trust Business B £ B £ Partners’ loan

  10. Taxation of key person policies Sir John Anderson: Chancellor of the Exchequer 1944 Relative size of market for each need No premium tax relief if • Major shareholder (above 5%) • Policy set up to cover a loan • Must satisfy Anderson rules for tax relief on premium • Employer/employee • Cover loss of revenue / trading profits / income • Reasonable sum assured • Short/reasonable term (originally five years however HMRC may accept retirement age as reasonable) • Local inspector of taxes should be informed/consulted

  11. PruProtect for Key Person Cover • Disability Cover for Business tailored to the needs of the modern business • Defaqto 5 star rated critical illness cover • Serious Illness Cover with severity based payments • Minimum Protected Account option • Local face-to-face support • Specialist business protection team • Vitality benefit for key individuals • AA rated* financial strength • More likely to get a payout from our Serious Illness Cover than a typical critical illness policy *Current rating by Moodys and Standard & Poors at June 2013

  12. Thank you

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