In our experience, business succession and estate planning are often seen by clients as something they “must get around to”. Regrettably, in many instances the driver for “getting around to it” is the unplanned experience, arising from one of the three ‘D’s: Death, Disagreement and Divorce. Most families are concerned to protect the family wealth for the benefit of the family bloodline.

Where the business owners are unrelated or where there are minority owners, it is imperative that there are mechanisms in place that provide for a ‘process’ when one of the three D’s occurs. These mechanisms encompass buy/sell rules, tag along/drag along rules and an agreed valuation methodology. In our experience, the exercise of negotiating a full scale agreement - not just a buy/sell rule for example - helps tease out the key issues and set in place some agreed principles. Equally the process often shows up an individual’s non-negotiable points and it is better that they are out in the open now, rather than when the crisis occurs.

We strongly support the use of insurance funded ‘buy/sell’ rules in stakeholder agreements.

We believe it is important that, in the event of the death or disability of a owner or the key people connected to that owner, there is the ability for all parties to move on quickly. For the outgoing person or their estate, getting out of the business is usually the most practical and sensible decision. Equally, the survivor is best served if they can get on and manage the business in an orderly way. We are conscious to ensure that parties deal with the situation when there is no insurance payout e.g. failure to disclose, suicide. Generally, we suggest that the full value of the shareholding/unitholding etc is paid out, but over a period of time manageable by the survivor, with or without interest or security.