Business succession planning
Download
1 / 15

Business succession planning - PowerPoint PPT Presentation


  • 98 Views
  • Uploaded on

Business succession planning. Understanding the needs of business owners and their families. <Insert name and/or date>. Partnership or shareholder cover. Establishing needs. Protection for: The business’s future Control in the right hands The partner or shareholder’s family

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Business succession planning' - nedra


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Business succession planning

Business succession planning

Understanding the needs of business owners and their families

<Insert name and/or date>


Partnership or shareholder cover
Partnership or shareholder cover

Establishing needs

Protection for:

  • Thebusiness’sfuture

    • Control in the right hands

  • Thepartner or shareholder’s family

    • Making sure the right people have the cash at the right time

An opportunity for advisers to develop professional connections


Risk of one death before age 65
Risk of one death before age 65

As firms grow, the risk of one employee dying can become significant

Number of employees

Age

Source: England and Wales Life Tables, 2011

These percentages are based on the average life expectancy for male and females at these age ranges


The company will
The “Company Will”

Determining the destination of your business assets

Without Business Protection:

  • Peter Nichols’ shares pass to his wife Paula Nichols

    Shares

  • David Smith and Brian Jones are the surviving directors

  • Lose total control of Peter’s share

  • Can they afford to buy the shares?

  • Will Paula sell her shares?

  • How will the bank react?

The surviving directors could potentially lose control following the loss of one of the business owners


Business succession the problem
Business succession: the problem

  • Not an exact science, different valuation methods

  • No established trading markets for private limited company shares

    • Rights attaching to shares

    • A controlling or minority interest?

    • Not freely marketable

    • Prevailing circumstances

    • How big a cheque would I have to write today?

    • Company auditor should be consulted


Business succession sole traders
Business succession – sole traders

  • Really a question of family compensation

  • Business owner takes out a policy on their own life

  • Written into trust for the family

  • For one person family limited companies, consider a Relevant Life Policy


Business succession partnerships
Business succession – partnerships

Flexibility is essential for larger arrangements

  • Each person takes out a policy on their own life

  • Written into trust for the remaining partners or shareholders

  • A business trust allows for future changes to the business structure to cope with new or retiring partners and even incorporation


Business succession limited companies
Business succession – limited companies

Flexibility is essential for larger arrangements

  • Each person takes out a policy on their own life

  • Written into trust for the remaining partners or shareholders

  • A business trust allows for future changes to the business’s structure


Arranging the policies

Life assured

Arranging the policies

An example: NSJ Ltd

Policy A

Potential beneficiary

Business Trust

Potential beneficiary

Potential beneficiary


How is partnership or shareholder cover set up
How is partnership or shareholder cover set up?

A purely commercial arrangement


Cross option agreement

Price

Market value: fair but keep cover up-to-date

Specified value: certainty but needs review

If one side exercises option other side is bound

Option to continuing partners/legal personal representatives

Cross option agreement

Ensuring fairness for all concerned


The cross option agreement

Lifecover

Deathbenefit

David Smith and Brian Jones

Shares

Will

Cash

Shares

Cross-option agreement

The cross option agreement

Providing certainty for all parties

Peter Nichols

Paula Nichols


Summary

Essential ingredients

Summary

Business succession planning

  • Cash

  • Control

  • Compulsion

  • Certainty


Pruprotect for shareholder and partnership cover
PruProtect for shareholder and partnership cover

  • Disability Cover for Business tailored to the needs of the modern business

  • Guaranteed Insurability Options to cater for the growing business

  • Local face-to-face support

  • Specialist business protection team

  • Financial Strength: AA rated by Standard & Poors

  • PruProtect business is written through the Prudential Assurance Company Ltd (PAC) benefitting from the scale, diversity and solvency of PAC



ad