Business Succession

Written on the 13th of January 2010 by Continuum Financial Planners Pty Ltd

Succession is the passing of something from the current holder to the next holder: you might think of it as a baton in a relay race. Sometimes succession happens in an orderly, planned way – and on other occasions, it is thrust upon us. Business Succession is no different: we can plan for it; or we can wait for events to catch up with us.

The two main areas for which Business Succession Planning is undertaken, are:-

• ‘retirement’; or
• Death.

‘Retirement’ in this context, could mean termination of an involvement with a business due to a number of possible reasons, including:-

• Changed circumstances/ interests;
• Incapacity (physically, or mentally);
• Bankruptcy; or
• Age-based.

Business owners, whether operating single-family businesses, or are in partnership with others (whether incorporated or not), are encouraged to ensure that succession plans for the business are clearly documented – supported with all necessary agreements (and risk insurance where appropriate) – for the guidance of those who follow.

Typically, a business succession plan will incorporate both a partners/ shareholders agreement and a buy-sell agreement. The buy-sell agreement will usually be funded with relevant and adequate insurance policies. (Refer to our article Buy-Sell Agreement cover for more on this matter.

Continuum Financial Planners can advise you on actions and/ or legal advisers who can assist with the preparation of the appropriate plan for your circumstances.

We thank McKays Solicitors for allowing us to base our article on this topic on material found in their website.