Has your business got a will?

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Has your business got a will?

Director Share Protection/ Partner Share Protection

Do you run your business together with others (other than a Partnership with just a spouse)?
If yes, then what agreement if any, do you have in place, if your co director/s were to die or retire?

  1. In order that the surviving directors/partners can have an option to buy the deceased shares and that the estate can equally have an option to sell the shares, there needs to be a suitable agreement in place. This is often referred to the business having a Will. The agreement will come into force when any party to the agreement exercises their option and will succeed the deceased will.
  2. Retirement of an individual shareholding director, also presents similar problems to a director dying. An agreement which gives the retiring director, options for the sale of shares and for the remaining shareholder directors the options to buy the shares, requires an agreement to be in place.
  3. Who currently has control of the company? If no agreement in place, a deceased shareholding will form part of his/her estate. Will the beneficiaries of the estate, now have control of the company? Or will they inherit a minority shareholding of questionable value?
  4. Will the inheritors take an active role in the business, do they have experience/skills which can be profitably used in the business? Are they welcome in the business? Would the surviving directors/partners rather buy back the deceased’s shareholding?
  5. If it’s a minority shareholding, how will the shares be valued? Would there be a willing buyer of the shares for ‘fair value’? An agreement can include a formula for calculating a fair value for the shares.

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