There are a range of documents that can help to protect you and your business.
With a Shareholder Agreement in place there is a formal understanding, agreed by all of the business owners.
By determining what happens in certain situations there is much less potential for disagreements that could damage the business.
Establishing the rules which everyone has to comply with makes good business sense and having an agreement in place will help protect the relationships you valued when you decided to work together.
Business Lasting Power of Attorney
If you were to become incapacitated, the Court of Protection would consider you to be vulnerable and would have a duty to inform all financial institutions to freeze your personal and business bank accounts and other assets.
The consequences for your business could be catastrophic…
A Business Lasting Power of Attorney enables your chosen individual to take over your financial affairs on your behalf without cost or delay. You can place restrictions on and give guidance on how they should deal with your affairs or you can restrict their powers to only deal with certain issues.
Cross Option Agreement
It’s not something many of us want to think about but the death of a shareholder, especially if he or she is also a Director, can have a major impact on a business that hasn’t planned for such an event.
Planning for this eventuality and having a well drafted Cross Option Agreement in place can not only ensure that both parties needs are met but it can also create a tax efficient environment utilising Business Property Relief.
The basis of a cross option agreement is straight forward; each shareholder agrees that following his or her death, the fellow shareholders will have the option to buy the deceased’s shares (in some cases this could also include those of his or her spouse).
Typically the shares would be made available for purchase at market value (a so-called ‘call option’) and that his or her personal representatives (on death) have the option to sell the shares (and, in some cases, those of his spouse) to the continuing shareholders.
If funding the sale/purchase of the shares is likely to be an issue, the shareholders entering into the Cross Option Agreement will take out a term assurance policy. Any amount that becomes payable under the policy is held in Trust by the remaining Shareholders to pay for the deceased’s shares.
Structuring the transfer of shares in this way, it is possible to make sure that the deceased’s shares qualify for business property relief. In valid circumstances this would currently provide 100% relief from Inheritance Tax.
A business requires legal documents on a regular basis, this could be:
Review of your current terms and conditions
Non Disclosure or Non Compete declarations
Director’s service agreement
Sale and purchase agreement
You may also need to consider what possible effect putting in place such a document might have on you or your business and if you need tax, accounting or financial advice.
We will coordinate all of the advice and expertise you need and produce the relevant documents.
If you would like to discuss your particular situation please contact us