Sent: 14-11-2005 00:16:27
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The young bull and the old bull! - Tony Crilly
Does anyone know the old story about the young bull and the old bull? Well it was about the eager young bull wanting to have some fun with the valley full of cows. The old bull shows experience by stating that they should take their time over the task.
I think this is a very common example of disparity of attitude between business owners of different generations. I am often confronted by the same differences of opinion between a younger business owner not wanting to pay for the expense of insurance on the life of an older proprietor. Very often the younger person will not see the value in protecting against risk, especially risk of losing a business principal.
Here are some points to consider when advising business owners about business succession agreements:
- If they don’t have an agreement in writing, anything is better than that;
- The key to the process is providing certainty on the exit of an owner on happening of an event;
- Remind them the document is about stopping families becoming involved in the business with the surviving owner;
- There is rarely a perfect solution, just find the best one in the circumstances;
- If there are a few owners and one of them refuses to be part of the agreement, let them;
- Keep it simple if possible and don’t try to be too fancy in the documented requirements
- Understand that tax is payable a s well as stamp duty on a transfer
- Make sure a document gets signed and try to prevent endless procrastination;
- Make the buy sell agreement the start of a corporate strategic succession plan
- Assist the clients to gather the required documentation
- Reassure the clients that their circumstances are “normal”, that is most business owners have trouble finding a solution
- Encourage logical commercial outcomes and discourage high emotion;
- Get help from an accountant when determining valuation principles.
So there are just a few concepts that I believe assist in the practical application of risk insurance in circumstances of a buy/ sell agreement.
Happy hunting and I look forward to hearing some war stories from readers on this topic. Just email me the details and I am happy to help!
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