An integral component of good succession planning for business owners is the succession of their business (or interest in a business) either upon retirement or the happening of a critical event such as death, incapacitation or illness.
If you own an interest in your business as a partner or shareholder, a buy/sell agreement provides a way of transferring the equity in a business upon the death or total and permanent (TPD) disability of a business partner.
Buy-sell agreements, in a general sense, provide that the partners agree to sell their interest in the business to the other partners if specified trigger events (usually death or TPD) occur, and each partner agrees to purchase the interest of the outgoing partner. Buy-sell agreements can also deal with some other related matters including how the value of the interest will be determined, how it will be transferred and how it will be funded.
Succession planning may be a difficult task for many family businesses and has the potential to cause conflict and division. Our commercial and estate lawyers assist family business members by taking into account all assets and tax requirements and the objectives of all stakeholders. We recommend that business structuring and succession planning form part of an integrated family plan so that fair and equitable arrangements are in place and transition can occur as smoothly as possible.
A good succession plan enables a smooth transition with less likelihood of disruption to operations. By planning your exit well in advance you can maximise the value of your business and enable it to meet future needs. Our team of specialist commercial and succession lawyers can assist you with documenting buy sell agreements and funding agreements and providing broad business succession planning advice.