As a responsible business owner, you probably don’t think twice about insuring your business assets. But what about the most critical elements of your organisation? The owners, key employees, and financial commitments? Whether you’re a one-person operation, or a major corporation, risk protection is as important as maintaining cash flow.
Continuity & Key People
Maintaining and servicing contractual commitments, profit forecasts, employee levels, market share, and customer/supplier confidence, are essential parts of business. Therefore, it’s important to mitigate all short, and long-term, repercussions your business may experience due to a loss in productivity from an unexpectedly absent key person.
If you had a golden goose, would you insure the animal or its eggs?
It’s just as prudent to insure profitable specialists, or key people, within your company as it is to protect assets.
Key person cover injects cash into your business if you lose a vital member of your organisation to injury or death; and, additionally, provides a financial safeguard against all future losses your company will experience as a result.
The scope, and range, of key people insurance varies depending on your required level of coverage.
It can include:
The founder, or leader of business, who is closely linked with its image and success in the minds of the general public, suppliers, distributors, customers and other stakeholders.
Those people who bring specialist skills, or knowledge, to the business (such as an active shareholder or partner with particular skills and/or expertise).
A person who has the confidence of a major business lender (and may have given personal guarantees in respect to borrowings).
Why do you need protect cover? It’s simple. If you’re a sole trader, or member of a partnership, you are personally liable (to an unlimited extent) for obligations (including loans) incurred in the normal course of business. Should suffer an injury, or die, your personal assets could be at risk due to a demand for repayment on a business loan.
Nothing can cripple your business faster than monies owed to the IRD, banks, finance companies, staff, and suppliers. As a result, it makes sense to protect your assets from any unforeseen repayment demands.
Disability, or death, can force unwanted change on your business’ ownership structure and potentially jeopardise your cash reserves and assets. Therefore, it’s important to protect the future control of your company before such an event takes place.
Why do you need Partnership/Shareholder Purchase Cover and a Buy/Sell Agreement in place? Because it provides certainty for all those involved in your business. It outlines what will happen in the event of injury, or death; and, subsequently, removes all future doubt. What’s more, they also ensure minority shareholders and/or business interests are sold at a fair value.
A Partnership/Shareholder Purchase Cover and a Buy/Sell Agreement can:
Create the funds, and mechanism, for the sale and purchase of a business interest.
Help create, or find, a future owner, or owners, for your business.
Provide the means whereby an existing business owner can receive a fair price for his/her interests.
Most SMEs have at least one of these three risks. Thankfully, Advanced Financial Solutions can tailor a proactive solution for you and ensure your business is sustainable should one of these occur. Please don’t hesitate to contact us for more information.