Business Protection :: Oregan Financial Services Ltd

By: Oregan Financial Services  05/12/2011
Keywords: financial services, Business Protection

Your business is vital to your financial well being. From it you derive your income and your shareholding has a value which has been built up over many years hard work. Therefore you need to ensure your business is prepared for the unexpected. The death or serious illness of a shareholder can have major repercussions for the future of any business. Consider the following:

  • Statistics show that 72% of businesses ceased trading within 5 years of the death of the founder of a business (Source: BDO Simpson Xavier).
  • In a business with 4 partners, the probability of at least one partner dying before age 65 is 66% (Source: LIA)
  • In 2008 one in five claimants under Business Assurance policies with New Ireland were aged 39 or under.

Shareholder Protection Plan

On death a shareholder's shares normally pass to their next of kin. This often leads to problems as the next of kin may not have the ability or want to become involved in the business. Therefore, they may wish to sell their shares as soon as possible. The remaining shareholders also may not want to work with a new shareholder.

Therefore, typically they would have to raise monies personally (not through the business) to buy back the shares from the next of kin. Would they be able to raise this money? What if they don't want to take on the additional borrowings? Both parties and ultimately the business are exposed in this situation and a fair and positive outcome is highly uncertain.

The solution is to put in place Share Purchase Insurance to ensure a plan exists and more importantly that the necessary funds will be available. The structure of the business will determine whether Corporate Co-Directors, Co-Directors or Partnership Insurance should be put in place.

Keyman Insurance

Unlike Share Purchase Insurance which is designed to protect the shareholders, Keyman Insurance is designed to protect the business. The future success of every business depends on a few 'key' people. Losing a key person unexpectedly through death or serious illness would mean the business having to survive without that person's unique skills, contacts and management ability. Loans may be called in, sales may drop and inevitably the business will be under very significant pressure.

A Keyman policy pays a lump sum to the business to help it cope financially (albeit temporarily) with the loss of the keyperson. The lump sum might be used to temporarily replace lost profits, to recruit a suitable replacement or even just to repay loans.

Keywords: Business Protection, financial services

Contact Oregan Financial Services


Print this page


Other products and services from Oregan Financial Services


Services :: Oregan Financial Services Ltd

We can help you plan your retirement funding by reviewing your current pension in terms of its performance, costs, suitability of investment funds and associated risks and advise you on the best way forward. It's an unpleasant thought and many people prefer to plan their finances on the basis they're immortal, but that's not how life works.


Retirement Planning :: Oregan Financial Services Ltd

At normal retirement age having saved a large pot of money, you take a portion of the fund as a tax free lump sum and the balance provides you with an income to live the rest of your days in relative comfort. We will review your current pension in terms of it's performance, costs, the suitability of investment funds and associated risk to your circumstances and advise you on what you should be doing.


Family Protection :: Oregan Financial Services Ltd

If we truly care about our loved ones, any sensible financial plan has to ensure they are adequately provided for under all possible outcomes, whether you go on to live a healthy and prosperous life and can work into your 60's or 70's, whether you become ill and can no longer work at a much earlier age, or even if you unexpectedly die along the way.


Investments :: Oregan Financial Services Ltd

The alternative is living on the edge, beyond your means, using credit whenever you can get it and ultimately putting yourself and your loved ones under too much pressure. Whether it's saving for your children's education, your retirement, a holiday or even just for a 'rainy day', saving is a vitally important habit. The mythical investment with total security and strong returns doesn't exist so it's always a trade off between risk and return.


Income Protection :: Oregan Financial Services Ltd

You could also or alternatively insure yourself for a lump sum which would be paid out tax free in the event of you suffering a specified illness such as cancer. If you unexpectedly became seriously ill in the morning and could no longer earn how would it impact financially on you and your loved ones. People understand the logic of insuring their car yet they question the logic of insuring their income.