Protecting your biggest asset and ensuring continuity

What makes a business successful often lies in the knowledge, experience and skillsets of the key people in the company. They steer the business in the right direction, make tough decisions and ultimately drive the profitability of the company. Taking a degree of risk is an inevitable part of creating a successful business.

However, there are some risks which can be planned for in order to reduce or eliminate this risk entirely. This includes the risk of you or another key person in your business passing away or being struck down with an illness or disability. For example, is there someone in your business who has the extensive technical knowledge, significant contacts or brings in most of the sales? What impact would their departure have on your business? If you play a critical role in the company as a major shareholder or a key decision-maker, the consequences could be far more distressing than expected.

The implications of such an unforeseen demise raise a number of questions for all businesses, especially small businesses which will need to consider:

  • How much would it cost to replace the required expertise, experience and technical know-how of the individual? Will the loss of an important person shake the confidence of shareholders or other key stakeholders in the company?
  • Are there any existing business loans or credit facilities which are due to be paid? If yes, how would this payment affect the company’s overall profitability?
  • Will the loss of this key person cause any business disruption or loss of an important business network and erode potential profits?
  • If the key person is also a shareholder what will happen to their shareholding in the event of untimely death? This could lead to family members becoming involved in a business in which they have little or no expertise or experience. This could impact profitability and damage the long-term value of the business.

What is key person protection?

A business could suffer a devastating financial loss in the event of the death, critical illness or incapacity of a key individual. Key person protection is intended to cover future loss of profits, so a lump sum received by the business at this time could be critical to ensure continuity of the business. For example, it could be used to cover the cost of finding a replacement and training them, or repaying a loan or overdraft that depends on that key person.

Who is a key person?

An individual whose death, critical illness or disability would have a serious effect on the continuing financial success of the business. For example:

  • Partners
  • Director(s)
  • Senior Employee(s)/Specialist(s)
  • Business Owner(s)

What is shareholder/partnership protection?

If a shareholder or partner dies, or becomes critically ill, the plan ensures that funds are made available for the other business owners to purchase the business interest of the deceased/ill individual. This minimises any interruption to the business whilst also compensating the partner/shareholder or their family.

We understand that all businesses are different. At Select Investors, we take the time to get to know you and your business, so we can identify what type and level of protection you and your business requires. Whether you are looking for shareholder or partnership protection or need to ensure your business is covered in the event of an unexpected departure of a key person, we have a solution for you. We draw upon our wealth of experience of working with successful businesses to provide solutions that are tailored to fit your business and its specific protection needs.

Please join us for a special webinar on Thursday 29th April at 12:00pm, presented by industry experts; Matthew Pinckard, Senior Manager, Intermediary Distribution, Aviva and Matthew Lloyd, Managing Director, Professional Wills as well as Jamie Burgmann, Private Wealth Manager at Select Investors, where we will discuss the key considerations for protecting your biggest asset and ensuring continuality.

 

The article is by Jamie Burgmann, Private Wealth Manager, Select Investors

 

Select investors is a Partner Practice of St James’s Place (Singapore) Private Limited.

Members of the St. James’s Place Partnership in Singapore represent St. James’s Place (Singapore) Private Limited, which is part of the St. James’s Place Wealth Management Group, and it is regulated by the Monetary Authority of Singapore and is a member of the Investment Management Association of Singapore and Association of Financial Advisers (Singapore). Company Registration No. 200406398R. Capital Markets Services Licence No. CMS100851. St. James’s Place Wealth Management Group Ltd Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number 02627518. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

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