Recently a colleague informed me about a case in the news, of a coffee company, that had been started by three brothers and grown into a multi-million-pound enterprise. Sadly, one of the brothers passed away at the young age of 45.
They had no agreement in place for this eventuality and so when their widowed sister-in-law inherited her fair share of the business, she was never included in the business and never received her fair share of distributions.
A big high court case followed and now the remaining brothers are being forced to part with £7million, to buy out the sister-in-law and her children, from the company. Funds that they do not have, and which could force them into bankruptcy.
Lesson learnt
This is an extreme case with large values at stake but these things happen to small businesses too and can result in the bankruptcy of businesses that have been running successfully for many years, over a simple lack of paperwork and policy. A correct agreement and policies can be set up to mitigate this risk, with the benefits being:
- Better control in the event of a director/partner death.
- Financial gain, being that surviving directors can automatically buy out the deceased parties shares, fully funded with a life policy.
- Family security is assured as the deceased parties family will receive a lump sum pay-out from the business shares, that they can benefit from.
If your business has several shareholders, get in touch and let’s discuss how we can put a plan in place and get your paperwork in order.
If you would like to consider your options, please contact us here.
Fusion Financial Ltd. Ref: 11600565 Registered in England & Wales. Registered Office: Marlborough House, 298 Regents Park Road. Finchley London N3 2SZ Fusion Financial Limited is an appointed representative of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority.
