BUSINESS INSURANCE


Shareholder





Shareholder Protection Insurance

Having a key person like an owner, director or major shareholder fall seriously ill, be seriously injured or die can have a devastating effect and cause far reaching consequences to a small to medium sized business especially where one or two people may be key revenue generators. 

A key part to any business plan is having an effective succession or exit plan. Succession planning is a process whereby a business ensures that family members or employees are recruited and developed to fill each key role within the company. In an ideal world you would groom a family member or key employee to fill these key roles and eventually take over or buy the business when you retire.

However when a director, major shareholder, or owner of a business becomes incapacitated or passes away, it is often necessary to shut down an otherwise healthy business. Or in many instances, successors inherit a healthy business, which is forced into bankruptcy because of lack of available liquidity to pay business debt or buy out the incapacitated or deceased persons shares in the business. Proper planning through a personalised Adelphi Business Insurance Plan helps avoid many of the problems associated with succession and transfer of ownership.

Implementing an Adelphi Business Insurance Plan with:

  • Business Life Insurance
  • Business Serious Illness Cover
  • Business Total & Permanent Disability Cover
  • Key Person Cover

and incorporated with a properly worded Buy/Sell Agreement provides a very effective succession plan in the event a business owner, co-owner or key person dies or is unable to continue in his or her role. 

A well structured Adelphi Business Insurance Plan would overcome the negative impact of the following options and ensure all the stakeholders receive a fair settlement.

Close the business down. If the business is largely based around the person who has died or who is unable to continue running the company, the most realistic option may be to close it down and liquidate the assets. However a liquidated business may be worth a fraction of the value of a going concern.

Sell the business on the open market. When the business owner is unable to conduct an orderly sale of the business and a forced sale is conducted, the sale price is likely to be low. Also, it may be hard to find a suitable purchaser when there is a time constraint.

Business co-owners buy the deceased’s business interest. This is an obvious method of succession if there is more than one person involved in the ownership of the business. If properly planned and financed, the purchase and sale can be a prompt and efficient transaction. However, this may not always be a straight forward process.

Give or sell the business to a family member. This presumes that there is a suitable family member who wants to take over the business.

Give the business to one or more employees. This may be an option but it requires careful planning and is not suitable for all businesses. 

Sell the business to a competitor. Although this may be an option, the business may simply be left vulnerable to a competitor raiding its customer base. Competitors would need a compelling reason to buy the business and may not be willing to pay the full price. 

 

Succession diagram

An Adelphi Insurance adviser can sit down with you and your business partners, in the comfort of your office or home, and develop your business's Personalised Business Insurance Plan to determine the ideal level of Shareholder Protection Insurance you need for your business’s unique circumstances and needs.

 

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