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5. Buy Sell Trust
I need to find an exit for my shares for my family when I am not around.
A well-constructed plan is essential to protect the value of the business and provide cash for the family in the event there is a major disruption in the business due to a co-owner’s death, disability, retirement or serious major illness or any other event that jeopardizes the continuity of the business. It is a very critical thing which lots of business owners miss out while busy finding business.
Point to check it yourself as a business owner:
If a co-owner/business partner dies today, can you work with his family to run the business?
Will the co-owner’/business partners family members know how to run the business with you?
Can they work well with you?
Would your beneficiaries be able to get a fair price from the remaining Business Partner?
Do you have the funds to buy out the co-owner’s/business partner shares/interests from the family members when there is no pre-agreed price in a written agreement?
Can the shares/interests you are purchasing be transferred quickly to your family?
Problems Without Business Protection Plan
Often these are:-
1.A new partnership is created due to the inheritance of the shares/interest by inexperienced heirs. Chances are this new partnership may fail due to many factors.
2.There is no pre-agreed price for any sale to take place when the heirs decide to sell to the other co-owners. As a result, it may take years to settle a transaction price with lots of disagreement.
3.Some of the unqualified heirs may insist on being directors of the company and be active in running the business. This may lead to serious disruptions and disputes within management and it may cause lots of internal dissatisfaction among the employees.
4.It is possible that the co-owners may decide to abandon the business and start their own due to disputes with the heirs.
5.Loss of profits and uncertainty about the business future success result in valuable employees leaving the company due to the uncertainty of business progression.
After all your hard work in building your business, you need to avoid such problems.
THE SOLUTION – BUY-SELL TRUST
Our Buy-Sell Trust consists of:-
Buy-Sell or Cross Option Agreement:
covering the terms of the sale and purchase including the agreed value or formula, events triggering a sale, funding and mode of payment.
Power of Attorney:
authorizing us, Rockwills Trustee, to transfer the shares/interests to the other co-owner(s) upon the occurrence of the agreed events that trigger a sale.
Trust Deed by the co-owners:
instructions to Rockwills Trustee regarding the periodical distribution of the sale proceeds to prevent these being misspent by the beneficiaries.
Life insurance policy:
as the main funding mechanism to purchase the shares/interest of the outgoing co-owner.