Business owners urged to think about the future
Running a business requires huge amounts of dedication, energy and resourcefulness. The day-to-day pressures can sometimes seem overwhelming but ultimately company owners can benefit from a great sense of personal achievement and financial reward.
But what happens when the owner of the company leaves the business by either choice or circumstance? How will it continue to function, who will manage it and who will be the new owners?
All of these questions can be answered through effective succession planning. All scenarios can be planned for whether the owner exits through choice, early death or retirement.
However, despite today’s challenging economic climate, many businesses do not have adequate succession planning in place. Partnerships still do not have written agreements and companies only have the simplest form of articles. Outdated personal wills and a lack of financial planning make matters worse and problems can arise not just for business owners but also their families.
Tim Ratcliffe, Gordons corporate partner said: “Many business owners do not realise is that forward planning over time is required to ensure successful transition on retirement. This is especially the case where a next generation of family or tier of management is taking over the helm.
“At Gordons, our corporate team is skilled at understanding how different businesses operate and can advise on planning for unexpected events to ensure the successful future of an organisation. Preparing what we call, a ‘company will’ is of the upmost importance particularly when planning for the unexpected.
“Businesses need to know that partners and shareholders have no automatic rights to buy out minority interests, even at a fair value, should a problem arise or someone needs to leave. Equally though a minority has no automatic assurance that their business interests will be bought and whether they will be offered a fair price.
“It is therefore in the best interests of a business for proper buy/sell mechanisms and valuation arrangements to be put in place. These could include the option for other shareholders to acquire shares on the death of a shareholder offering a clear solution on premature death. The Gordons team can assist to ensure the option documentation is properly thought through so that it can be funded from the company’s own resources or via life insurance.”