Eldest sister & 2 brothers run a family business.
All are married. Sister has 2 children, 2nd brother has 3 children and the youngest brother has only one child.
The family business worths $18 million.
The eldest sister owns 20% of the shares, and the 2 brothers 40% each.
1. There were no explicit succession plan on how should their spouses or children take over in the event of any of the shareholders passed away.
2. The 2nd brother’s spouse is a home maker since their first child was born and not good with money management.
3. Sister didn’t want to work for the rest of her life and would like to from her business, but she understands that it is extremely difficult to ask the brothers to buy over her shares worths $3.6million. The business may not have the liquidity to buy her out and secondly according to Company Act 1965 Section 67, company cannot use her own funds to buy over shareholdings of her partners.
4. The youngest brother didn’t care about succession as he felt that the his child will eventually take over his place.
1. Put in place a shareholder’s agreement (SHA) to deal with the share transfer agreement.
2. A Business Value Protection Trust was set up with Trust deed stating the terms of payment.
3. Business Value Protection Insurance was put in place to ensure adequate funding of the SHA. The sister purchase a policy worth $3.6 mil and the two brothers each purchase policy with Sum Assured of $7.2mil. The policies were absolutely assigned to the Trust.
4. Endowment policy was taken up individually to ensure that even if the company fails, their retirement funding will be taken care of as well.
5. Health insurance policy was taken up to ensure whole life protection against unforeseen medical bills.
6. All of them have their personal wills written for their other individual assets.