Long-term strategic protection for your enterprise — from key-man cover to properly structured buy-and-sell agreements.
Strategic planning that protects the enterprise.
At Bekker Investments we advise on tax-efficient structures that insure your business interests. Being independent, we source the most appropriate, cost-effective solutions to your business concerns.
Corporate planning involves formulating long-term business goals so that strategic planning can be developed and acted upon — what was once called corporate planning is today referred to as strategic management.
Key-man insurance minimises business risk on the death or disability of a key individual.
Owning and managing a business is not for the faint hearted, and risk issues are often overlooked — including the death or disability of a key employee or shareholder.
Financial pressure follows the loss of a key person: lost income from specialist knowledge, the cost of recruiting and training a replacement, and loss of goodwill as customers adjust. Key-man insurance helps ease this.
Where key individuals have signed surety on credit facilities, their estate is at risk, as the bank may call up the facility on death. It is sensible for directors to insist on surety cover to address this liability.
A key-man policy is usually owned by the company on the life of an employee, with proceeds paid to the company. One structure makes premiums tax-deductible and proceeds taxable; an alternative makes premiums non-deductible and proceeds non-taxable. There are capital gains tax and estate duty implications if you get it wrong, so these should be structured properly at the outset.
An approach used by sole proprietorships, partnerships and close corporations to divide the business interest of a proprietor, partner or shareholder who is disabled, deceased, retired or wishes to sell. The interest is sold according to a predetermined formula to the company or remaining members.
Owners often have most of their wealth tied up in the business. On death, remaining shareholders need to pay fair value to the deceased’s estate — which can be impossible to fund at short notice. Buy-and-sell assurance lets existing shareholders purchase the interest at fair value, ensuring continuity.
There are two parts: an insurance policy on each shareholder’s life, and a written agreement between shareholders dealing with the intention to buy and sell and the valuation of the business. Cover levels must be calculated from shareholding percentages and the business valuation.
Most commonly the policies are owned by the various shareholders on each other’s lives — premiums are not tax-deductible, but proceeds are tax-free and exempt from estate duty. Bekker Investments can facilitate discussion with shareholders and work alongside your attorney to draw up a suitable agreement.
Review your existing arrangements with our professional team.
