Business & Farm Succession

Crisis Succession™ 

A Crisis Succession™ Plan exists:

1.       To ensure that there is maximum certainty with regard to the preferred outcomes for those affected by the death or disablement of a business partner.

2.        To ensure that those affected by death or disability have maximum possible choices with respect to their involvement in their business, retaining lifestyle, financial security and minimising the emotional impact of the death of a business leader.

3.        To ensure that potential conflict is minimised with regard to distribution of the estates and ownership of a business.

Crisis Succession™ manages the transfer of equity to the remaining proprietor/s should one or more depart as a result of the happening of the triggering events (i.e. death, total and permanent disablement or trauma) contemplated in the business succession agreement.

In essence, the requirement is to ensure that there is a smooth transfer of equity to the remaining proprietors in a manner that satisfies the interests of all the stakeholders in your business.

Additionally, a Crisis Succession™ Plan ensures that the estates of business owners will receive a fair value for the work put into developing the business.

Properly drafted and funded business succession agreements obviously come into their own during periods of great stress for a business, such as the death of a proprietor. The stability and certainty that careful forward planning brings at these times cannot be underestimated.

It will be a considerable comfort to other stakeholders in your business such as staff, creditors, customers and financiers to know that professional arrangements and the funds to back up those arrangements are in place for the orderly transfer of equity and the continuation of the business under the experienced guidance of the remaining proprietor(s).

Funding your Crisis Succession™ Plan can be achieved through:

  • Sale of assets.
  • Borrowings.
  • A payment arrangement over a predetermined period.
  • Insurances.
    Insurances normally provide the most effective and cost efficient method. The cost of borrowed funds or using business equity (that can be or is invested in the business) is normally far greater than the cost of insurance.
    Alternative arrangements do not provide the same degree of certainty.
    In addition to the funding arrangements, a properly structured agreement should be entered into that accommodates your wishes and reflects the nature of your financial arrangements.
    Such arrangements should be covered in separate shareholders or partnership agreements.
    Your properly funded business succession plan can ensure that the needs of all the stakeholders are met through proper documentation of your succession strategy, combined with the ready availability of the funds required to satisfy your obligations under the agreement.
    To summarise, a Crisis Succession™ Plan is a financial and tax plan that will:
  • Realise your assets in the business at a time when you or your beneficiaries need them,
  • Give your business every chance of survival when you, or your partners, are gone or suffer long term illness,
  • Ensure that families related to the business receive adequate compensation for the true value of their interest in the business,
  • Fund the transfer of business interests to ongoing partners,
  • Avoid you running the business with someone not of your choice,
  • Provide a ready market for your business interests,
  • Structure your affairs to reduce unnecessary capital gains tax and income tax being paid by your beneficiaries.

Working closely with Business owners Estate Planning DNA can assist you to secure the future success and continuity of your business.