There is no one alive who is Youer than YouDr Suess
Commonly, we are too busy to live in anything but the moment.
Business is disrupted by so many things on a day to day basis. A primary example would be technology; how much can do on your phone, tablet or computer that once required a physical presence at a branch or office.
The question I often see clients perplexed by, however, is something more disturbing than how technology is affecting their business; it is how their business would be affected if they suddenly weren’t able to do their job.
Consider, for a moment, the people in your business. How would the business cope if suddenly they didn’t turn up to the office or were uncontactable? What if a tragedy occurred and they suddenly passed or became incapable of managing their own affairs, let alone their work for the customers/clients of the business.
I’m sure you would agree that it’s an overwhelming and cringe-worthy thought, and I wholeheartedly appreciate that. However, what that feeling may inspire is perhaps awareness of what could happen and result in an incentive to engage in that conversation and seek to truly understand what that might mean for you, your family and your business.
A “key person” in a business (from a legal perspective) is often a director or other office-holder in an organisation. This is different to the more broad use of the word “key person” in an internal management sense, such as those people in teams that are creative, innovative leaders and drivers and managers.
The ways in which an organisation continues if a key person leaves due to illness or death and what this means for their role depends on a great deal of things. The two key starting points are often:
- The Business Succession Plan
- The Key Person’s own personal estate planning
The Business Succession Plan
A Business Succession Plan is exactly what it sounds like; it’s a plan to work out how the business is to continue if one of the key persons leave through illness or death.
Some of the primary factors of formulating the right succession plan is considering:
– the goals and objectives of the business now and for the future
– who owns what interest in the business
– who are the key persons in the business and what are their roles
– how would the sudden loss of a key person impact on the financials of the business (on both sides of the ledger)
– if someone’s interest is to be bought out in this situation, what are the terms of that buy out and where is the money coming from
These factors are central to the success or decline of any business.
Key Person’s personal estate planning
If anything happened to a Key Person, an alternative decision-maker is going to be necessary to possibly bridge the gap between the event that caused the key person to to leave and the legal effect of transferring control or ownership (or both).
This means that a Key Person’s own personal estate planning is absolutely vital to ensure the most appropriate people are taking care of these essential steps. We have previously written a helpful post with 5 reasons you should think about your estate planning yesterday and another on the importance of superannuation planning, which can also be, depending on your circumstances, another essential consideration.
When a key person leaves the business due to illness or death, often it may be the significant other or an adult child who is left dealing with their affairs. Further, it is not at all uncommon, that the same person who is now dealing with that key person’s business interests was never involved and had no working knowledge of that key person’s business affairs. I cannot begin to describe or give insight into the turmoil that is thrust upon the family member or friend of the key person and the overwhelming pressure on them, all whilst they attempt to come to terms with their personal distress in accepting or dealing with their loved one’s illness or death.
The law recognises certain people will have priority over others, when there are no formally appointed legal personal representative for a person who has lost capacity or passed away. The fundamental issue with this , however, is that the person with that priority may or may not be equipped to deal with it and even though they have priority, there are often formal legal steps to be followed (and therefore time and money) associated with having that appointment as the representative legally and formally recognized.
Ultimately, succession planning is an insurance policy. You hope you don’t need it, but you (or your family) are certainly pleased that the important people are covered as best as one can be.
The idea of you not being around to make things happen and manage life is a difficult thought-process and discussion to embark on.
I appreciate that it’s difficult to imagine who would be well-equipped to handle what you do, because, after all, no one alive is youer than you. BUT, more difficult and distressing reality is what happens when the process and discussion never happens and your loved ones, even the work family, are left to fight off waves with not even a life-jacket.
And, there is no time like the present to start thinking and planning. Hopefully you never need to worry about it, but what if you do?…
If you think we can help you, reach out on 07 3392 0099.
Written by Michele Davis, Head of Succession & Elder Law, Wilson Lawyers.
Important Notice: This publication is provided as general information only and should not be considered or relied upon as legal advice. The law is complex and you should always obtain specific legal advice about your circumstances from a qualified legal practitioner. If you require legal advice, please contact our office to see how we can help.