Think Tank: Plan for the future by making a company will
Plan for the future by making a company will Most of us know that it’s vitally important to put in place a will to ensure that our assets are distributed to our heirs on our death, in accordance with our wishes. But as a business owner, have you considered what would happen to your business if you or one of your key colleagues was to pass away suddenly? A critical part of your planning and decision making should be centred around managing risk for the future, which includes thinking about what should happen to your business interests following your death, or the death of someone else who is crucial to the business. Putting a company will in place is a fundamental pillar for a sustainable business.
What is a company will? There are two main elements to putting the right financial protection in place for your business. The first is the company will, which is key person insurance (also commonly known as keyman insurance), and is essentially a life insurance policy taken out by a business to insure its most valuable employees.
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The policy is designed to protect the company from the financial impact of losing essential people through death or illness. It’s about managing risk and addressing the ‘what if’ factor that none of us wants to contemplate. As a business expands it’s often the case that one or two members of staff become almost indispensable in terms of their ‘know how’ or specialist expertise. These people can be difficult to replace, so key person insurance can provide the business with a cash injection at a critical time to help manage the disruption, or assist with recruiting a replacement.
Shareholder protection The other element is shareholder protection, which is used as a planning tool to ensure that the right money ends up in the right hands at the right time. Typically we would work in parallel with the lawyers putting together the shareholder agreement, to ensure that
