If you run your business in a partnership, have you thought about what might happen if a key shareholder passed away or became too disabled to continue working in the business? It is important to ask yourself how your family, or theirs, would be paid for their ownership in the business without it significantly impacting the finances of the remaining partners.

A Buy/Sell Agreement allows you to stipulate what is to happen to your business shareholding should an unexpected event occur such as death or disablement. The agreement requires the remaining owners to buy the afflicted owner’s shares and in a lot of cases, the cost of these shares is met through an insurance policy which was put in place to cover the death or disability of an owner.

How income protection insurance and Share Purchase Agreements go hand in hand

By initiating a Buy/Sell Agreement, any insurance benefits are legally obligated to be used for the purposes that the insurances were established for. What this means for you, is that should you unexpectedly die, your remaining business partner will receive the lump sum benefit and therefore be obligated to buy your shareholding from either your family or estate.

The benefits of Share Purchase Agreement and the appropriate insurance in place are extensive. For example, should your business partner pass away, you will be able to focus on dealing with the impact of the death of your partner without having to worry about how you are going to purchase their share of the business. Also, your partner’s family will be able to receive the funds from the buy out of their share of the business in a timely manner – relieving them of the task of finding a buyer who could well be an unsuitable fit for the company.

What happens if I have insurance and I do not have a Share Purchase Agreement?

Should you have insurance with no Buy/Sell Agreement in place, your business partner could spend the proceeds from a claim however they wish. This could leave the deceased’s family with a shareholding in a company that they cannot run and ultimately the shares could decrease in value and become worthless.

Putting an agreement in place

Should you wish to put a Buy/Sell Agreement in place, each owner will need to see a lawyer as every business situation is unique. Here at Business Insurance NZ, we commonly deal with the insurance cover that is put in place for the purposes of establishing a Buy/Sell Agreement and we have a partner referral programme with reputable industry professionals who have extensive experience with Buy/Sell Agreements. Should you wish to request a phone call to discuss your situation further please click here.

 

Rachael Manson
Rachael Manson
03:27 30 May 20
Alan has been brilliant to deal with and extremely patient as we worked through the changes that we were seeking for our life cover and income protection requirements.
Celia Grigg
Celia Grigg
23:36 21 May 20
Hayley was great, from responding to my initial inquiry to finalising my policy. She provided good information and communicated with me every step of the way - efficient, thorough and friendly. She went above and beyond.
Wang Emily
Wang Emily
01:59 19 Apr 20
Hayley has been very helpful and professional with her insurance services, she is committed to work for the best interest of her clients , friendly to deal with and flexible to suit clients’ requirement. Definitely Recommended!
Toko Ngakiau
Toko Ngakiau
20:19 29 Mar 20
I am very wary of random calls about insurance, but I found Daniel from IronOak to be very transparent and a pleasure to deal with.On all occasions he was able to come out and visit us. He explained in detail what we were looking at, and offered a number of comparisons. HIGHLY RECOMMENDED
Hannah Lawrence
Hannah Lawrence
21:00 15 Mar 20
Hayley was very efficient and always delivered on her promises. She put together a good package for me. I would highly recommend Hayley.
Jay Nimbus
Jay Nimbus
08:11 15 Mar 20
Daniel was great to deal with and made seemingly complicated decisions a lot simpler than I expected. I had been stressing about it for a while, wish I had got in touch sooner. Much thanks!
Annette Page
Annette Page
22:39 01 Mar 20
Prompt, professional, pragmatic advice and service. Many thanks.
CrazySmurf Azrial
CrazySmurf Azrial
11:20 28 Feb 20
Hayley was awesome to deal with, answered all my questions and followed up with me weekly to keep me informed throughout the whole process. It can be daunting but she made the process easy. She was easy to talk to and didn't feel pressured.Thanks Hayley for organising everything and helping me through the whole process.
Paul has helped me to find the best option for my family insurance. He made everything easy.
Trixie Lawton
Trixie Lawton
15:55 25 Dec 19
I found Hayley very pleasant to speak to and was explained everything in great detail and in easy terms
Kayleigh Price
Kayleigh Price
22:12 16 Dec 19
Paul was very easy to deal with and made income protection insurance seem much clearer. He gave sound advice, was efficient, friendly and I would recommend him to anyone.
Sunil Kadri
Sunil Kadri
23:23 01 Dec 19
Paul did alot of work to find the right policy for me, was very patient as I wavered, and even helped me with the right questions to ask of my insurer on their parallel policy. Overall he proved an excellent broker whom I'd gladly recommend, and go back to myself.

 

Compare Now!