Buy/Sell Funding Insurance

Buy/Sell Funding Insurance

If you have partners or shareholders in your business who are not immediate and dependant family members you will need to have a properly constituted buy/sell agreement in place, together with a funding plan to guarantee the execution of the buy/sell agreement, otherwise known as a business will.

What this means is that should you or a business partner die or suffer a major trauma it serves to guarantee the transfer of the business shares at a guaranteed pre-determined value. The funding is guaranteed by way of appropriate life and/or trauma insurance.

The Advantages are Two Way;
The agreement guarantees that the survivor/s retain full ownership of the business. Also, the outgoing partner/shareholder and their estate are guaranteed a predetermined amount for their shares.

Any insurance payout will of course depend on the type of insurance and the insurance contract wording that is applicable.

Many buy/sell agreements we see do not properly address the problems. They do not provide a guaranteed outcome of the share transfer or value, thus leaving the surviving partner with no surety of share value and no funding with which to purchase the outgoing partner/shareholders shares. In fact some situations we have seen would put the business in jeopardy if the existing agreement had been enforced.

The various terms of these agreements needs to be thoroughly thought through. In some circumstances insurance premiums for this insurance may be tax deductible. This however does not fit every situation and can be complex.

Please seek our advice first.

We have witnessed situations where a strong business of great value has resulted in the outgoing shareholders estate realizing nothing or nearly nothing due to inadequacies in the buy/sell agreement.

We regards ourselves experts in the area of this type of agreement. We are in regular contact with Australia’s leading legal experts in this area.

Talk to the experts at Canberra Insurance Brokers. Again, we provide regular reviews of your situation so that your changing requirements are properly met.