1. Why should business owners make a will? (Fiona Dillon, Partner and Head of Private Client at Birchall Blackburn)
Every business owner should make positive provision for what could happen in the event of their death. Planning ahead and making a will to ensure business and estate is looked after should be encouraged.
Those who make a will can have the peace of mind that their estate passes to the family and friends of their choosing. It also allows business owners to appoint executors and trustees to gather assets and then distribute money or items as requested.
If there is no will in place, then the state writes one on the business owner’s behalf and the estate passes under the Rules of Intestacy. This could result in the estate not being distributed how the deceased intended.
Business owners should always consult a specialist legal expert who will be able to advise on wills, business property relief and inheritance tax. Attaining the correct legal information when making a will, can ensure that businesses are left to beneficiaries in the most tax efficient way possible.
2. Which types of business owner in particular should consider what will happen to the business if they pass away? (Fiona Dillon, Partner and Head of Private Client)
Every type of business owner should consider what would happen if they were to pass away, but particularly family run companies where formal agreements often don’t exist. Disputes can quickly escalate in the absence of a formal agreement and planning.
3. Why is a shareholders’ agreement important? (Paul Tyrer, Head of Corporate and Commercial at Birchall Blackburn)
A well drafted shareholders’ agreement can accomplish many things not covered by company law, such as; dealing with succession issues, resolving shareholder disputes and enhancing the rights of minority shareholders.
It is a highly flexible document, which if carefully tailored to the needs of the shareholders, can ensure the smooth running of a business. Unfortunately, too many business owners only discover this once it is too late.
4. What damage can a badly drafted shareholders’ agreement do? (Paul Tyrer Head of Corporate and Commercial)
A poorly drafted shareholders’ agreement may cause problems when it comes to valuation of shares and could result in a situation where a majority shareholder wishes to sell the business, but the minority is unwilling.
In some companies this can have a detrimental effect, not just on the shareholders but the employees and the business in general.
5. What is Key man insurance, and why should business owners think about using it? (Answer to be attributed to Paul Tyrer Head of Corporate and Commercial)
Key man insurance is a policy which pays out in the event of death or incapacitation and is prudent to consider taking out in cases where a business is heavily reliant on the leadership of one or two key individuals.
The proceeds of the policy are typically used to either fund the purchase of their shares or meet the costs of recruiting a suitable replacement.