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Companies plan for the future of their operations but not their people.
Who will take control if the unexpected happens?
How will the business be run?
How will they cope with the financial effects?
What if the loss of a key member compromises the viability of the business?
Will the bank still be understanding on overdraft and loan facilities if profit is expected to take a dive?
Will creditors want payment upfront for goods and services rather than on a rolling quarterly basis?
How will this impact your cashflows coming in and the future loss of revenues that director or employee would have earned?
How will the customers respond, especially small to medium sized enterprises where reputation or relationship with an individual is often the bedrock foundation for their reason to do business with you in the first place.
How will day-to-day management be affected?
The rest of the team picking up the slack may become overworked and stressed with the lack of the key person’s expertise.
Will the family of the shareholder want to cash in their deceased’s shares or will they demand to work alongside you running the company?
Will the money be available for this or will they sell the shares on to another entity that you now have to deal with?
What of the family?
Is there protection for the firm’s future – is control remaining in the right hands?
Do the right people have the cash at the right time to buy out the partner or shareholder’s family?
When businesses have started to ask themselves questions such as these, it is not surprising to see how there is a £1.1 Trillion Business Protection Shortfall Gap in the UK.
½ of private limited firms have no Key Person Insurance to cover directors, loss of earnings or loan cover.
42% of partnerships have no protection. Source Legal & General / British Chamber of Commerce
Relevant Life Policy
Lump sum when employee dies or terminal illness.
Not taxed as benefit in kind (no guarantee of receipt).
Tax deductible against corporation tax, no National Insurance Contributions to pay on it.
Employee continuation to personal plan on leaving employer or switch it to new employer and they can pay premiums without further checks and remains tax deductible.
Doesn’t count toward annual or lifetime pension allowances.
Key Person Cover
Against loss of income if crucial staff member lost.
Certain individuals can be invaluable assets to the business.
Provides contingency plan to protect profits.
By financing hire of replacement, folding their projects up or limiting exposure.
Owned and paid for by employer.
Paid-out to employer.
Recover lost profit.
Buy back shares from beneficiaries (family of partners).
Retain full control of company.
If surviving partners have insufficient resources or cannot raise funds to purchase outgoing shareholder’s share.
Family of deceased often forced to deal with surviving partners, sell their shares or become involved in running the business.
Lenders can demand immediate repayment of outstanding loans at short notice where business fundamentally altered.
Director’s loan or commercial mortgage.
Trust Issues Addressed.
Flexible choices including Cross Option Agreements.
Tax implications explained.