We’ve talked in recent weeks about the importance of considering business protection, identifying a need and considering your key man requirements.
We have also touched on Business Succession and it is with that in mind that we would ask – Do you have a business will? You would be surprised when this is asked how often the answer can be – “I don’t need it!”
As part of our Wealth Management Plan offering for clients we ask if they have considered putting a will in place and if they have already written one, when it was last reviewed.
It would be remiss of us not to cover this and in a similar vein it is crucial to any business succession planning that a business will is in place to ensure shares in a business go to the right people on the demise of Directors or key shareholders.
We feel it is vital that a business Director or key shareholder considers if they died or became critically ill, where their business interest would go?
In the first instance a company’s Articles of Association will deal with the issue of transferring and selling shares.
A company’s Articles of Association form the basis of the company’s constitution. They’re commonly referred to as the internal rule book of the company. The articles are chosen by its members and are legally binding on the company and its members. A company’s articles are subject to the Companies Act 2006 and can’t contain rules that would cause the company or its directors to operate outside the law.
When a shareholder dies, their shares will form part of their estate and ultimately pass to their heirs under the terms of their will or the laws of intestacy where they haven’t made one.
You wouldn’t want to die and leave your personal wealth subject to the rules of intestacy so why take the risk with your business assets?
It is vital that firms understand and know what their Articles of Association say about how shares transfer. All those likely to be affected by the death or critical illness of a shareholder need to know if the Articles enable the shareholders to do what they want with their shares should the worst happen.
If the articles are found to be lacking in terms of the preferred instructions then they can be amended by a Solicitor and a Business will can also be completed to ensure that everyone involved has the peace of mind that the value they have within a business will be protected and pass to their chosen heirs when the time comes.
If you are unsure about what you already have in place and want to revisit your existing arrangements we are happy to offer a second opinion service to look at your Articles and business will.
If you still need to put a business will in place then don’t hesitate any longer, let us look at your business and what is required and make the step to having everything reviewed and protected for the New Year.
Check in again next week where we will discuss in more detail how a business will can work in conjunction with a cross or double option agreement to ensure capital is paid back into the business if required or to the heirs of a deceased shareholder.
Claire Armstrong