Do you, as a business owner, have a will as a personal succession plan? Do you also have a ‘business will’?

According to Sanlam’s internal research, two thirds of business owners do not have a ‘business will’ (buy-and-sell arrangement), and for the third that do, only 10% review their ‘business will’ on a regular basis.

So the questions are: do you as business owner have a will as a personal succession plan and do you also have a ‘business will’? If you do, is it structured correctly, when was it last reviewed, is it valid, is it signed, and do you know where it is?

This is crucial, because you’ve built your business or your share of the business with your blood, sweat and tears, and your intention is for your loved ones or dependants to benefit from your hard work.

Not having a ‘business will’ and the associated insurance could result in the following challenges: 

  • Your co-owners might not have the necessary funds to purchase your shares in the business from your estate.
  • Your spouse may not want to or may not be able to participate in the business, which means he or she is left at the mercy of your business partners.
  • Your family might not be able to realise the true value of your share or interest in the business as the valuations of your share could be disputed in your absence.
  • Disputes are usually expensive, drawn out over long periods of time and distracting, especially in hard economic times when finances are tight.
  • The executor might want to sell the owner’s interest in the business to the highest bidder, opening up the business to an outside party.
  • The existence of the business could be jeopardised because of the lack of focus and ongoing fights with the remaining owners.
  • Your share or interest in the business could ultimately be sold far below the fair market value.
  • Your business partners could channel all new contracts to a new business, reducing the value of your interest in the old business over time to almost nothing.

Because there is no ‘business will’, you ultimately have no influence or say on what should happen to your interest in the business. Your intentions cannot be realised. All of this happens while your family struggles to make ends meet and at the same time come to terms with their untimely loss.

A valid, up-to-date and signed ‘business will’ (buy-and-sell agreement) and associated insurance cover is the perfect solution to mitigate the risks as discussed above. It allows you, the business owner, to make the necessary provision not only for your untimely death, but also an unplanned event like permanent disability.

The primary purpose of the ‘business will’ is to provide the surviving co-owner(s) with the necessary funds to purchase your interest in the business, thereby protecting their interest and yours, and allowing your family to enjoy the true value of your efforts.

The solution provides a smooth exit in the event of your death or permanent disability. This legal agreement, together with its funding mechanism, not only ensures continuity of business in the event of your death or permanent disability, but also strengthens the business structure.

Should you wish to review or implement a buy-and-sell agreement and discuss your concerns and requirements, please do not hesitate to contact us. 


Source:  Deon Theunis, Head: Distribution Support at Sanlam Business Market.