No one wants to dwell on what will happen in the event of a death. However, in business, the death of a business partner can have an enormous impact on continued day to day operations. Take a minute to jot down a few essentials which need to be in place for your business to continue running. Think about the steps you would take to smooth over the transition, in the event of death or sever incapacity or illness.
What would happen if you or your business partner died suddenly?
Planning for the death of a partner in a business must be looked at from both sides of the equation. What are the needs and expectations of the survivors in the business and the members of the deceased estate?
Contingency plans for the death of a business partner can be incorporated into a Buy/Sell Agreement. A properly drafted Buy/Sell Agreement with appropriate insurance covers should ensure that there is sufficient cash to enable the deceased partner’s estate to be paid out. What you need to do is periodically update the Buy/Sell Agreement. Make sure it reflects the current value of the business and try and get insurance covers on the partners that reflect the value of their share in the business. It is very important that a commercial solicitor drafts the Buy/Sell Agreement, checks the company documentation and Wills, to ensure that, in the unfortunate event of a premature death, the business will be able to survive and the deceased partner’s estate to be paid out.
As part of forward planning, business people should consider making an Enduring Power of Attorney. An Enduring Power of Attorney provides the documentation relating to the appointment of a power of attorney to be enacted if the person subsequently loses their mental powers or is incapacitated. Normally, an enduring power of attorney is made in favour of a spouse, relative or friend, and gives the power to act for you if you can no longer act for yourself.
How long is it since you reviewed your Will? Indeed, do you have a Will?
There is also some basic information that you should be summarising to assist in the administration of your affairs in the unfortunate event that administration is required. This would relate to trade secrets of the business and agreements reached with key suppliers that might not be fully documented. Writing down many of the business issues will assist the successor in running the business.
It is very important that business people implement proper plans to ensure that, if something does happen to them, due to death or permanent incapacity, there is a structure in place that will enable the business to continue. We recommend that you consult your commercial solicitor for a review on these matters as part of an annual legal check-up.
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