APPLICATION FORM BUSINESS SUCCESSION AGREEMENT SELF FUNDED Please read the following before completing the application form. Business owners should integrate the success of their business with the plans which will ensure the financial security and future of the business by planning for circumstances where a key individual in the business dies or suffers a significant disability which prevents them continuing in the business. Business succession agreements document those plans. Business succession cannot be done in a vacuum. It must be done in the context of overall financial planning for business owners. The business succession agreement documents the framework on which succession planning is carried out. The checklist outlines issues which business owners should consider when undertaking succession planning. In particular, it is important to consider: 1. how and if the business can be passed onto the remaining business owners or the estate or legal personal representative of an outgoing owner; 2. planning for the entry and exits of business owners and increases and growth in business; 3. contingency planning and ownership transitions in the event of death or permanent disability; 4. tax consequences and planning; 5. family law considerations and planning; 6. other documents which address the rights and obligations of the business owners (e.g. shareholders agreement); 7. ability to fund exits of key owners. By completing and submitting the Application you confirm as follows: 1. you have considered the items listed in the checklist; 2. the information provided is correct. If you have any questions about completing the application form please contact: Christopher Davis Anthea Faherty Principal Senior Associate Phone: (07) 3014 6530 Phone: (07) 3231 0645 Email: cdavis@mcw.com.au Email: afaherty@mcw.com.au McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 1 of 10
CHECKLIST The following matters ideally should be considered when preparing a Buy Sell Agreement for business succession purposes: 1. Do you have details of all the relevant individuals involved in the business, together with details of their related entities who own the business interests 2. Are there existing Agreements covering the ownership of the business interests which may impose restriction on the transfer of ownership? These may include company constitutions, trust deeds, shareholders agreements, unitholders agreements, partnership agreements and existing buy sell agreements 3. Are the premises from which the business operates owned by some or all of the business owners? Are their interests in the premises also to be covered by the Buy Sell Agreement? 4. What triggering events are to be covered? Death Total and Permanent Disablement Trauma 5. How are the buyouts to be funded? Insurance 6. What is the valuation approach to be used for a trigger event? 7. How often will the parties review the value of the business and relevant insurance policies? 8. Who is responsible for obtaining and maintaining insurance coverage Third party borrowing Related party borrowing Sale to third party Independent valuation at trigger event date Formula or agreed methodology Fixed value agreed by parties Valuation equals insurance proceeds A combination of the above Each year Every second year Every third year The Business Each relevant individual and their related entity 9. Who is responsible for paying for insurance premiums? The Business Each relevant individual and the related entity McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 2 of 10
10. If there is a shortfall between the valuation and the insurance proceeds, what are the terms of repayment of the shortfall. 11. Who is responsible for procuring the release of any guarantees provided by the outgoing principal or its related entity? 12. If trauma is a triggering event, how long does the trauma sufferer have to return to the business? 13. If there are no insurance proceeds, how will the agreement operate? 14. If the sale proceeds where there are no insurance proceeds, what are the terms of the sale? 15. If there are excess proceeds, who will be entitled to the proceeds or how will be they be applied? When is the shortfall payable: At completion of the transfer of the interest in the business/entity By instalments Period of repayment of instalments: years Is there to be any penalty applied if the shortfall is due to a breach of the terms of the agreement? Is interest payable? Interest rate: % How is interest calculated? Compounded Simple Is the repayment to be secured? The Business / the continuing principals The outgoing principal, its executors and any related entity 3 / 6 / 12 months? Only the remaining principals will have the option to buy (the outgoing principal do not have the option to force the buyout) change from the normal arrangement any principal can force the sale to proceed Same as if there are proceeds Period of repayment of instalments: years Is there to be any penalty applied if the lack of insurance proceeds is due to a breach of the terms of the agreement? Is interest payable? Interest rate: % How is interest calculated? Is the repayment to be secured? Retained by the business for the paying down of debt, then the balance to the outgoing principal Retained by the business Retained by the outgoing principal McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 3 of 10
APPLICATION FORM Please ensure you complete all details below, and contact us with any questions you have prior to submitting the form. AGENT/ PURCHASER S DETAILS First name Surname Name of firm (if applicable) Telephone Fax Email address Street Address Suburb/City State Postcode Postal Address (if different from above) Suburb/City State Postcode INFORMATION REQUIRED/ TO BE CONFIRMED / TO BE PROVIDED 1. Any constitution, trust deed or other establishing document 2. The balance sheet/ financials of the business have been included with the application form. 3. Product disclosure statements, terms and conditions and insurance certificates for each of the policies of the principals 4. Copy of any stakeholder agreement (i.e. shareholders agreement, unitholders agreement, partnership agreements etc) 5. Copy of a valuation of the business or report or correspondence outlining the value of the business and how this was calculated McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 4 of 10
BUSINESS DETAILS AND STRUCTURE Business Name: Business number: Street Address: State Postcode Postal Address: State Postcode Structure of the Business Private Company Unit Partnership Public Company Nature of the Business/ description of the business (industry, speciality, etc) Value of the Business and details of value Was the business valued by a valuer or accountant? If so, has the valuation been provided? Has the balance sheet or financials of the business been provided Direct ownership Is there any debt in the business Is the debt to be funded out of the insurance proceeds Related Entities Are there any related entities or holding companies which should be included in the agreement? If so, please provided the details of the entity (Name, ABN, ACN, ARBN etc) Name ACN/ ABN DETAILS OF TRIGGER EVENTS 1. If a principal was severely injured or ill and could not return to the business for a period of time (Trauma). 2. If a principal was totally and permanently disabled and could not return to the business (TPD). 3. If a principal dies. McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 5 of 10
BUSINESS OWNERSHIP / DETAILS Director 1/ Principal 1 Full name Name of related entity (If applicable) ACN/ ABN/ ARBN Structure of the interestholder Discretionary / Family Self owned Company/ corporate trustee Unit Hybrid Interestholding details Percentage Interest % Date of acquisition Class of interest held Number of interests held Has the principal or its related entity granted an interest in its interest in the business? If so, provide details Estimated value of the interest $ Paid up capital amount $ Insurance Policy details 1. 2. 3. Annual premium $ $ $ Insurance covers Death Total permanent disability Trauma Income protection Amount of coverage Death $ Income protection $ Trauma $ Total permanent disability $ Has the Principal given any personal guarantees that might need to be released? Details of Entities which have personal guarantees: 1. 2. 3. 4. McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 6 of 10
BUSINESS OWNERSHIP / DETAILS Director 2/ Principal 2 Full name Name of related entity (If applicable) ACN/ ABN/ ARBN Structure of the interestholder Discretionary / Family Self owned Company/ corporate trustee Unit Hybrid Interestholding details Percentage Interest % Date of acquisition Class of interest held Number of interests held Has the principal or its related entity granted an interest in its interest in the business? If so, provide details Estimated value of the interest $ Paid up capital amount $ Insurance Policy details 1. 2. 3. Annual premium $ $ $ Insurance covers Death Total permanent disability Trauma Income protection Amount of coverage Death $ Income protection $ Trauma $ Total permanent disability $ Has the Principal given any personal guarantees that might need to be released? Details of Entities which have personal guarantees: 1. 2. 3. 4. McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 7 of 10
BUSINESS OWNERSHIP / DETAILS Director 3/ Principal 3 (if any) Full name Name of related entity (If applicable) ACN/ ABN/ ARBN Structure of the interestholder Discretionary / Family Self owned Company/ corporate trustee Unit Hybrid Interestholding details Percentage Interest % Date of acquisition Class of interest held Number of interests held Has the principal or its related entity granted an interest in its interest in the business? If so, provide details Estimated value of the interest $ Paid up capital amount $ Insurance Policy details 1. 2. 3. Annual premium $ $ $ Insurance covers Death Total permanent disability Trauma Income protection Amount of coverage Death $ Income protection $ Trauma $ Total permanent disability $ Has the Principal given any personal guarantees that might need to be released? Details of Entities which have personal guarantees: 1. 2. 3. 4. McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 8 of 10
BUSINESS OWNERSHIP / DETAILS Director 4/ Principal 4 (if any) Full name Name of related entity (If applicable) ACN/ ABN/ ARBN Structure of the interestholder Discretionary / Family Self owned Company/ corporate trustee Unit Hybrid Interestholding details Percentage Interest % Date of acquisition Class of interest held Number of interests held Has the principal or its related entity granted an interest in its interest in the business? If so, provide details Estimated value of the interest $ Paid up capital amount $ Insurance Policy details 1. 2. 3. Annual premium $ $ $ Insurance covers Death Total permanent disability Trauma Income protection Amount of coverage Death $ Income protection $ Trauma $ Total permanent disability $ Has the Principal given any personal guarantees that might need to be released? Details of Entities which have personal guarantees: 1. 2. 3. 4. McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 9 of 10
DEBTS & PERSONAL GUARANTEES OF THE BUSINESS AND THE PRINCIPALS Loans CURRENT DEBT INTEREST RATE FINANCIAL PROVIDER TERM GUARANTEES Lines of credit/ Overdraft Creditors Shareholder/ director/ principal loans Total RETURNING THIS FORM After completing this form please either: print, sign, and fax it to McInnes Wilson Lawyers at (07) 3221 0479; or print, sign, scan, and email it to McInnes Wilson Lawyers at rssgroup@mcw.com.au; or check the confirmation box below and email the form to McInnes Wilson Lawyers at rssgroup@mcw.com.au To print this form for signing click here: PRINT To email this form to McInnes Wilson Lawyers, after confirming instructions below, click here: SUBMIT McInnes Wilson Lawyers Pty Ltd ABN 30 137 213 015 Page 10 of 10