The loss of a business partner or shareholding director can have a major impact on the success of a business in terms of ensuring continued control for the remaining owners.
The potential problems that might arise can depend on the business type, the size of the business share, and the procedures laid down in the articles of association or the partnership agreement, if there is one.
For Limited Companies the chances are that the share of the business, along with the rights attached to it, will transfer to the spouse or children of the deceased. For the remaining shareholders to keep control of this share it would have to be purchased back from the family. If the remaining shareholders were not in the position to buy the shares back they could be sold elsewhere or the family member may wish to take an active role in the business. If the deceased held a controlling interest in the business this could give the family member full control over all other directors.
For a Partnership, the deceased's value within the Partnership must be paid to their estate immediately. This may involve winding up the business and liquidating any assets if other funds are not available.
For a Limited Liability Partnership, the deceased member's interest will pass to their estate and although the new owner will not be able to interfere with the management of the business they are entitled to receive anything that the original member would have done without having to contribute to generating the profit.
In any of these situations the need to find a large cash sum would come at a time when the business is also suffering the financial impact of losing a key Director or Partner so it is important that, if this happens, plans are in place for the remaining owners to be able to buy a deceased colleague's share of the business.
With the right planning we can help you achieve 3 important outcomes;
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