Business Succession Planning
Business partners can enter in to a legally binding Buy / Sell Agreement. This agreement guarantees the transfer of the shares of an outgoing partner to the remaining partner(s) in the event that a partner is unable to continue in the business due to death or disability, in return for an agreed payment for the outgoing partner’s business share entitlement.
A legally binding Buy/Sell agreement accompanied by Buy/Sell insurance guarantees a purchaser in the event a partner can no longer work in the business, guarantees a market price for the outgoing partner and guarantees funds are available for the transfer to occur.
Having a Buy / Sell Agreement in place provides certainty, that one partner could sell their share of the business to their business partner and be guaranteed of funds being available to pay their share. It also provides a business partner with certainty that they are the only party with the right to purchase the share and do not have to borrow money to do it, as the Buy / Sell insurance provides the funding.
The agreement states that when a partner is deceased or the insurer assesses that the partner will never work again in his own occupation and makes payment of the policy claim benefit, this is the trigger for the transfer of ownership of the partner’s share of the business to take place. The claim payout of insured amount is considered payment for the partner’s share of the business and therefore their business partner becomes the sole owner of the business.