Running A Business? Don't Let This Happen To You!
Read about how this once-successful manufacturing business failed when personal tragedy struck – and how it could have been easily prevented.
Sebastian and Andrew each owned 50% of the shares in a successful manufacturing business when Andrew died suddenly. Andrew’s wife, Judy, inherited Andrew’s share of the business via his Will.
Judy went to Sebastian and asked him to buy her share of the business as she required the funds. However, Sebastian was not in a position to do this at the time. Judy needed income and seeing as she had become a 50% owner of the business, she decided to work in the business, seeing as she was entitled to the same management rights and profits as her deceased husband.
Unfortunately, Sebastian ended up doing 100% of the work, but only receiving 50% of the profits. Furthermore Sebastian became increasingly focused on trying to source funds to buy Judy out, rather than on running the business. This resulted in the performance of the business suffering and profit declined significantly. Neither Sebastian or Judy were happy about this and the business ended up failing. Both parties have suffered devastating losses as a result, both financially and emotionally.
This outcome could have been avoided if Andrew and Sebastian had sought advice and executed a ‘Buy and Sell Agreement’, funded by insurance.
By using this strategy, Judy would have been fully compensated by the insurance proceeds in exchange for handing over her interest in the business to Sebastian and Sebastian would now own 100% of the business and receive 100% of the profits.
Don’t let this happen to you and your family. Come and speak to our Business Succession Planning experts to avoid compounding disaster in times of personal tragedy and loss.