Business Protection Cork

Financial Advisor Cork, Financial Planning

Business Protection Advice Cork

As every businessperson knows, the cornerstone of any good business is strong financial planning. With the right cover, your business remains protected, if the unexpected should occur.

How Key Man Insurance, Partnership Protection Insurance and Shareholder Protection Insurance works

Sally and Eimear are friends since college. They set up a business selling luxury gifts made in Ireland. Sally is the numbers person and Eimear is the marketing and customer services person. Sally is a finance wizard and makes sure there’s good cash flow. Eimear can sell anything to anyone and is amazing at customer care. Together they’re a very good team and they are strong in different areas and concentrate on those. As they’ve expanded the business they’ve taken on debt but it’s all manageable.

Life can catch you out though and Sally falls ill and dies. Sally has left a spouse and two young children after her. Sally had life insurance and so her partner and kids are taken care of financially but half the business is now owned by Sally’s partner. Without Sally’s financial skills, the business begins to suffer and falls behind on debt repayments and cash flow has taken a hit. The creditors want to call in their debt. Sally’s partner is now a joint owner but does not know how to run the business and doesn’t have the time.

  • A key man insurance policy would give the company a cash lump sum if either Sally or Eimear dies that could allow them to hire a new financial person and even pay off their debts.
  • Partnership Protection Insurance would allow Eimear to buy the shares off Sally’s partner giving more financial security to Sally’s family and ensure the company is in a more stable position too.
  • If there were multiple shareholders of the business Shareholder Protection Insurance would allow the remaining shareholders to buy back Sally’s shares.

 

Key Man Insurance/ Key Person Insurance - Looking after your future

Key Man Insurance - MBC Financial Cork

In companies, particularly SMEs, there can be an individual or individuals that are crucial, or key to the success of the company. If the company was to lose these individuals to death or illness, it could place the survival of the business at added risk. This could be your CTO, the CEO, your top sales person, anyone that is crucial for your success.

MBC Financial Limited assists you in understanding that those people that generate most income for you are a valuable asset, more valuable than machinery. Yet as a company you wouldn't think twice about insuring your equipment. Key Man insurance is the way to protect the company from if you lose these valuable members of staff to death or major illness.

Key Person Insurance or Key Man Insurance entails the application of a Life Assurance Policy initiated by a company on the life of one of its employees or directors with a view to compensating the company for an anticipated financial loss in the event of the death, contraction and survival of a specified Critical Illness, of the individual concerned.

Such a plan is designed to allow the company to put structures and arrangements in place to financially protect the business
with a cash lump sum, capable of helping the business deal with the ensuing challenges which may involve:

  • A fall in company profits
  • Difficulty in paying your company bills
  • Recruiting a replacement
  • Repaying outstanding bank loans especially those where personal guarantees were granted
  • Purchasing a deceased Partner’s or Director’s share of the business and ensuring their estate receives the
    appropriate market value

Partnership Protection Insurance

The loss of a business partner or shareholder can have serious implications for any company. In the case of the death of a business partner, as well as losing a key contributor to the management of the organisation, shares in the company can pass on to their immediate family, which can pose questions for the business going forward:

  • Will the family want to become involved in the strategic direction of the business?
  • Will the remaining business partner(s) want to work with the new shareholders?
  • Will the partnership have to pay an income to the new shareholders?
  • Would the family prefer a cash payment instead of a stake in the business?

Partnership Protection Insurance protects both the company and the new shareholders in the event of the death of a partner.

How it works:

  • An agreement is drawn up by the shareholders by which they agree to buy back the shares in the event of the death of one of the partners from their representatives.
  • A life assurance policy is taken out by each partner to provide a fund for the buyback of shares in the event of their death. Each partner is responsible for their own life assurance premium.

The Benefits

  • The surviving partners retain control of the company, as the deceased’s shares are cancelled.
  • The dependants of a deceased partner can realise their shares for cash, shortly after death.
  • The cost of the life assurance policies is borne totally by each individual.

It’s a good idea get legal and financial advice before taking out Partnership Protection Insurance as there may be circumstances where this arrangement may not be suitable.

Shareholder Protection Insurance

The loss of a major shareholder can have serious questions for the company owners and other shareholders:

  • What happens if the shareholder’s family want to be involved with the strategic direction of the business?
  • Will the company directors want to work with a new shareholder?
  • Will the firm have to pay ongoing dividends?
  • Would the new shareholder(s) prefer a cash sum?

In this case, a contract can be drawn up by which the company buys back the shares in the event of the shareholder’s death. As a result, Shareholder Protection Insurance could prove invaluable to protect the company from a major loss.

The process

  • The company enters in an agreement to buy back the shares from the shareholder’s representatives on death.
  • A life assurance policy is taken out on every shareholder agreement to cover the fund required to buy back the shares in the event of the shareholder’s death. In this case, the company pays the policy premium.

The Benefits

  • The surviving shareholders retain control of the company, as the deceased’s shares are bought back by the company and cancelled.
  • The dependants of a deceased shareholder can realise their shares for cash, shortly after death.
  • The cost of the life assurance policies is borne totally by the company, and not by the shareholders personally.

It’s advisable to get legal and financial advice before entering into an agreement regarding Shareholder Protection Insurance, as there may be circumstances where this arrangement may not be suitable.

 

 

Business Protection FAQ

What is key man insurance?

This is a business-specific life insurance that can compensate a company for the financial loss and other consequences of the death of an important member of the business.

How does key man insurance work?

You will pay a premium on a regular basis, based on the cover that is required. If the unexpected happens and this person dies, or becomes seriously ill, the policy will provide a lump sum to compensate for this event.

What are the product features for key man insurance?

Protection: If a key employee dies, a cash sum is paid to help maintain the business.
Continuity: Can help minimise interruption to business activity.
Financial assistance: Can help with bank loans that involved the key person.
Staffing: Can help provide resources to find a suitable replacement for the employee.

who is key man insurance for?

This kind of life insurance is taken out by a company of any size, where there is a need to protect against the loss of an extremely valued employee of high financial or strategic importance to the business.

Why take out key man insurance?

Availing of this kind of life insurance can give additional security to your business, as it safeguards against the loss of a key employee. As an employer, it can bring you peace of mind in the knowledge that you are protected from the financial fall-out due from the death or incapacity of a very important member of your staff.

What is Partnership Protection Insurance?

This is business-specific life insurance that can provide compensation to shareholders of a company. If one of the directors dies, a lump sum will be released, enabling the surviving directors to buy the deceased person's shares from their next-of-kin.

How does Partnership Protection Insurance work?

Partnership Protection Insurance can be taken out at any stage of your company's lifetime. You will pay a premium on a regular basis, based on the cover that is required and the value of the shares of the director.

What are the product features for Partnership Protection Insurance?

Ease and Choice: The deceased's successor is not obliged to become involved in the business.
Stability: The remaining directors can retain ownership of the company and provide continuity for the business.
Options: This insurance can also provide serious illness cover.

who is Partnership Protection Insurance for?

Partnership Protection Insurance can be taken out by the directors of a company of any size. It will provide funds to allow for the purchase of the shares from next-of-kin, in the event of the death of one of the directors.

Why take out Partnership Protection Insurance?

The death of a director may bring distress and grief to any organisation. As well as that, it could jeopardize the security and direction of the company. If the deceased director was a majority stakeholder, the remaining directors may lose control of the company if next-of-kin were to take over.

Contact us for Business Protection Advice

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