Corporate Protection. Globaleye eguide Series

Transcription

1 Corporate Protection Globaleye eguide Series

2 CONTENTS Introduction... 2 Key Man Cover... 3 Partnership and Shareholder Protection... 3 Pension from the Company... 4 Double (Cross) Option Agreements... 4 Voluntary Benefit... 4 Your Next Move... 5 Corporate Protection 1

3 Corporate Protection Any organisation s most important asset is its employees. The specialist skills and knowledge-base of key people is often gained over considerable time and specific investment in training, apprenticeships, promotion, skills and, of course, natural aptitude. What then would happen to your business in the event of the untimely death or disability of a key employee, manager, director or co-owner? Corporate protection and planning can offer financial security for your business and your employees should the worst happen. Corporate Protection 2

4 Key Man Cover Key Man Insurance is a life insurance policy that pays out on death or on a prolonged illness of a key employee. A key employee can be anyone from a Director to an ordinary employee as long as the company can show that their loss from death or disability will cause the company to suffer in turnover and profit or cease trading without these key people. There are four areas for which Key Man Insurance can provide cover for: When the company has to provide temporary personnel to cover an extended period that a key person is unable to work and, if the worst happens, to finance the recruitment and training of a replacement. If the company can demonstrably show a loss of profit. For example, by showing how much profit/sales/loss of knowledge would affect the company if a key person is unable to: work for a long period; ever work again; or has died. Enabling shareholdings or partnership interests to be purchased by existing shareholders or partners if a key person is unable to work. If anyone involved in the company is guaranteeing business loans or banking facilities. Insurance can be taken to equal the value of any guarantee. Partnership & Shareholder Protection The crushing impact of a critical illness or even the death of a partner or shareholder is all too easily overlooked. Problems arising from such an event can range from suffering a loss of profit to having to close the business down. Two of the main issues which cause most financial issues are: When shareholders leave their shares to a next of kin who may have no interest or skills necessary to maintain the company, but would still have voting rights at any official company meeting. This may not be in the company s best interest for the surviving shareholders. Some shareholders may want to cash in the value of their shares straight away, so without some form of cover, the only option is to try and sell the company. If the existing shareholders/partners don t have enough capital or borrowing power to purchase the company, they too would suffer financially. Corporate Protection 3

5 Pension from the Company Often, a business owner sees his company as his retirement nest egg, but what if the company and other partners do not wish to sell up? It is not uncommon these days to see owners start funding for personal pensions, with agreed minimum contributions for all parties concerned. This encourages partners to plan for retirement so that they are not reliant on the company being sold to realise their pensions. Double (Cross) Option Agreements Double Option Agreements are where a partnership or a number of shareholders draw up an agreement for the following: On the death of a partner/shareholder, the remaining parties have an option to buy the deceased s share of the business. This has to be achieved within a specific timescale. The deceased s estate has a duty not to sell the share to anybody else. There is also an option that the remaining shares are purchased by the remaining partner(s)/shareholders. A life insurance plan on an own-life basis is written in trust for the respective parties involved by all partners/shareholders. This then guarantees that the capital value of the entity is fully protected in the event of any partner/shareholder s demise. If a new partner joins, he or she would complete a supplementary Cross Option Agreement and take out a new life insurance plan in trust and, because of the way the existing trusts are written, they can then accommodate a change of beneficiary. With the advent of critical illness insurance, many existing agreements do not cover the possibility of a critical illness with their existing parties. Now, though, a new, standalone Cross Option Agreement can be made to cover the unique needs for all concerned. Voluntary Benefit These benefits are products and services that are available through an employer that can be bought by employees usually at a discount. This would come from employees own income or sometimes by way of salary sacrifice. Corporate Protection 4

6 YOUR NEXT MOVE By planning carefully, the use of insurance to protect against death, critical illness/permanent disability and Cross Option Agreements as well as organising a Will or amendments to existing Wills goes a long way to protecting you and your business for the future. Globaleye has many years experience in helping companies and their key personnel to minimise the disruption and financial emotion these issues may bring in what can be a very complex area. The advice we provide in this guide is free and without obligation. Corporate Protection 5

7 This material is for information purposes only and does not contain investment advice or an investment recommendation, or, an offer of or solicitation for, a transaction in any financial instrument. Always seek independent financial advice before investing in any product. The information provided and contained in this brochure are believed to reliable, but are subject to change without notice and Globaleye makes no representation as to the completeness or accuracy of the information or of any opinions expressed. PO Box: 24592, Dubai, United Arab Emirates Tel: Toll Free: Fax: info@globaleye.com