It is not only fictional multinational media empires that need to consider future ownership and control.
In 2023, the question of how to transfer control of a large, high-profile family organisation gripped attention. First the award-winning Sky Atlantic series, Succession, drew us in, followed by the real-life story which partially inspired Succession, the handing over of the Fox and News Corporation reins by Rupert Murdoch to his son, Lachlan.
What happens when ownership changes is not only a concern for the likes of multinational empires, real or otherwise. If you are a private company shareholder/director or a partner in a partnership, business succession is something that should matter to you. For example, what would happen if one of the fellow shareholders in your company or partners in your partnership suddenly died or suffered a disabling accident?
“We’d try to cope”, is the obvious answer and, in the very short term is almost certainly the right one. But what about the medium and long term? If your fellow director died and left their shareholding to their spouse or civil partner, would you welcome him or her on board as the replacement director? What if a seriously ill partner wants to be bought out of the partnership as they can no longer contribute to the business?
The way to deal with such potential business threats is to have a plan in place before disaster strikes and, equally important, to ensure the money is there to execute it; one without the other can be a minefield.
Take the example of the withdrawing partner once again. The partnership may have some agreement in place that requires the partner to retire in such a situation, but unless the remaining partners have the resources to buy out their colleague, a new partner may need to be found to buy in, or the business might have to be more radically restructured – or even sold – to release cash.
Realistic, professional provisions
What you and your business associates need to protect against such situations are:
- appropriate, tax-efficient agreements (such as key person insurance or shareholder protection) to deal with the sale of interests on death and serious illness; and
- life and health insurance cover to fund the purchase costs those remaining in the business will face.
For advice on both aspects, talk to us today – as Succession showed – you never know what tomorrow might bring.
The Financial Conduct Authority does not regulate tax advice or business continuity planning. Tax treatment varies according to individual circumstances and is subject to change.
