Business Protection – Financial Advisor Cork, Financial Planning

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.

 

Key Person Insurance - Looking after your future

In companies, particularly SMEs, there can be an individual(s) that are crucial, or key to the success of the company. If the company was to lose this individual(s) to death or illness, it could place the survival of the business at added risk.

At MBC Financial Limited, we assist in the process of ensuring the Company’s understanding that those people of most value tend to generate Income and should attract the same attention to
Insurance as a motor fleet or piece of machinery. Keyman insurance is the way to protect the company from these pitfalls.

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.

 

Contact us for Business Protection Advice

Financial Planning Standards Board

Certified Financial Planner