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Protection for Businesses | Business Succession | Key Person | Shareholder Guarantor Protection

Protection for Businesses and Business Owners

The pressure on business today to operate more efficiently, react quicker to customer needs, be more competitive has never been greater. But if something happened to you or perhaps a partner or shareholder how would this effect the business. Could or would the following happen

• Customers go to one of your competitors

• Bank becomes concerned about your financial Viability and so call in loans, overdrafts.

• Will staff get nervous and seek employment elsewhere.

• Will cash flow/revenue reduce putting financial pressure on the business?

A Business Risk Protection Plan designed by Blackmore Investments can help minimise these affects and take away the financial burden.

Business Protection can be effected for the following

1. Business Succession commonly known as Partnership or Shareholder Protection.
2. Key Person Protection
3. Proprietor/Shareholder Guarantor Protection 

Business Succession

What would happen to control of your business if you, a partner or shareholder unexpectedly exited the business, either from Disablement, Death or suffering a Life Threatening illness. How would their interest in the business be dealt with.

Would you want to purchase their share in the business to keep control rather than an outsider coming in? How would you feel if their family decided they would not sell their share? Can you negotiate a fair price based on the current value of the business, now that your partner/shareholder is unable to contribute to the running of the business? Where would you get the money to buy their share? Would your bank extend your credit?

These are all questions you will have to ask yourself should this happen to your business and you do not have a structured Business Succession Risk Protection Plan. Put simply this plan includes an agreement that ensures the ownership of the business/ shareholding changes with out interference and that funding is in place to pay the agreed price to the departed partners/ shareholders family/ estate.

The benefits are the smooth transition of ownership with the least disruption to the running of the business, its staff, customers and creditors. It also ensures each partners/shareholders family receives payment that recognises the effort and achievement of building the business over many years.

Key Person Cover

The most valuable asset of any business is its ‘people’. A key person is some one who is critical to the business and their loss would have a major impact on the business.

Some employees have particular expertise or market knowledge on which the success of the business depends. Their loss can not only affect the day to day running of the company but also the goodwill of the business and in turn ‘profitability’. Key people are not just the ‘boss’ but could be the IT Manager the Sales Manager/Director or perhaps the Technical Manager etc.

Some of the questions you need to ask yourself about the loss of key people from your business are

1. Can you find a replacement and what will be the cost of this?

2. Will relationships with clients or suppliers be affected?

3. Will relationships with creditors and lending institutions be affected and what could be the worst case scenario?

Key Person Protection can be arranged to protect against the loss of Capital or Revenue in the event of death, disablement or life threatening illness. An example of Capital is to cover the write down in value due to loss of goodwill or repayment of loans. For Revenue it could cover the costs of replacement or to offset future revenue loss.

Proprietor/ Shareholder Guarantor Protection

Many businesses over the years to grow and expand have had to seek financial assistance from banks/ financial institutes to provide capital (loans) to be able to do this.

As a result proprietors/ shareholders have had to provide personal guarantees to their bank to secure the finance. Unfortunately some believe that when they die so do their personal guarantees, well they don’t and the end result for their families can be as dramatic as having to sell the family home to clear debts of the business.

The death of a guarantor can also be a trigger in their loan agreement to cause automatic default and the ‘call up’ of the loan, leaving the business and guarantors personal assets at risk.

A Proprietor/ Shareholder Guarantor Protection Plan will enable funds to be available for loans to be paid and in turn Personal Guarantees released by the Bank in the event of death, disablement or suffering a life threatening illness.

At Blackmore Investments whether your concern or need is Business Succession Planning, Key Person Protection or Proprietor/ Shareholder Guarantor Protection we will work with you to analyse your companies current and future situation and design solutions that minimise these risks and the effects on your business to ensure the least disruptions at a time that will be both emotionally and financially difficult.

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