Wealth Planning -

Continuity and succession planning

The balance of supply and demand has been severely disrupted by both Covid-19 and the Russia-Ukraine war, causing significant repercussions in the global economy. These ongoing challenges have impacted demand, the cost of goods, supply chains, and investment decisions, leading to a phase of high inflation. Many businesses are concerned about the future of their business, resulting in an increased focus on business protection and successional planning.


7th August 2023


Protection should always be an area of priority for a business, but the situation we find ourselves in has understandably brought this topic to the fore. Chris Allen, a Chartered Financial Planner in our Wealth Planning team explains why it is crucial for businesses to review continuity and succession plans at this current time.

When reviewing continuity and succession plans, you should consider:

  • How would your business cope with the death of a key person that has a direct influence on the profitability of the company?
  • What would happen to the business should a director, shareholder or owner pass away?

Key person protection

A staggering 53% of businesses cease trading in under a year after the loss of a key person.

Why? Often the impact the deceased individual had on turnover or profit was so great, that the business can no longer continue without them.

There could also be litigation, brand damage and liquidation issues to contend with which can ultimately lead to business failure.

What can we do to help:

1. Identify key people in your business
2. Quantify the financial risks of an individual passing away
3. Create a solution and implement it

The typical result here is a life assurance plan, where the business receives the sum assured on a specific individual passing away.

Life cover

Another area of importance is relevant life cover. This is a tax efficient policy that allows an employer to offer a death in service benefit to their employees. Life cover policies are applicable to small businesses who do not have the scale to qualify for group schemes. This offering helps businesses offer competitive employee packages to attract and retain the right employees.

Similar to personal life cover, the pay-out would go to the employee’s family of financial dependents, however, it is important to note that this is an employer funded policy and the premiums paid by the employer allows the company to benefit from corporation or income tax relief. This is a key area of planning for employers to protect their employees or indeed directors who are paid on PAYE.

Shareholder protection

Research by Legal & General identified that only 30% of established businesses have life insurance to be used to buy the shares if an owner died and 14% have no plans on how they would meet this need.

Simply put, a shareholder protection arrangement allows the surviving shareholder(s) to have the funds available to purchase the shares of the deceased shareholder from their estate and maintain control of the business and the direction they want to take it.

    When discussing shareholder protection, it is important to think about the following:

    • What happens if you or one of the shareholders were to pass away?
    • What is the succession plan for the business?
    • Would the deceased estate/spouse inherit these shares and what does that mean for the future direction of the business?

    Recent events have shown us the future is unpredictable and we should all think about getting our house in order should the worst happen. A lack of planning could have a huge impact on your business and loved ones. Having the correct advice and solutions in place is always important, but even more so in these uncertain times.


    How we can help

    Our teams can assist you by assessing current agreements you have in place, the type of business you are operating and understand if any shareholders have medical conditions which will need to be considered.

    From there we can help with the valuation of each member’s shares, work with other professional advisers to get the correct agreement in place, and structure the plan properly to accommodate the different percentage ownership of various shareholders.


    Further reading

    Protecting your business

    You can’t stop the unexpected from happening, but you can ensure these events don’t derail your business completely. Whether your business is a partnership or limited liability company, we can help you identify key risks to your business plan and advise on continuity arrangements that will help mitigate against potential financial consequences.