Read time: 3 min read
Can an organisation continue after the death of an owner or leader? We’ve recently seen the British monarchy’s smooth succession plans in action, but sadly many small businesses aren’t so well prepared.
Too often, small-business owners avoid thinking about what may happen when they, or another director, die and how to plan for it. They don’t consider the skills, knowledge and experience - often not written down – that will be lost, nor how much it could impact employees, clients and suppliers. When a director dies, even simple things can prove challenging, whether that’s authorising bank payments; employing new staff; or even just refreshing insurance.
It can have longer-term impacts too. Often, others in the business will look to take advantage - for example, making a bid for the top job or leading a buyout. The death can create a power vacuum with parties coming into conflict, which can quickly become toxic. Even well-run businesses can unravel quickly without careful succession planning.
What can happen if a director dies
Unfortunately, businesses rarely think about the death of a director until it happens and becomes an urgent, critical issue. So, planning succession as early as possible is vital.
Think about what would happen, for example, if family members inherit shares but don’t want to sell them to the other directors – they may have other ideas about what to do with the business.
There can be emotional challenges, too. If a director dies and leaves the business to their family, they could end up trying to deal with their loss while facing a board of other shareholders looking to push their own advantage. Even worse, family members may argue over the company’s future. Too often, there’s no plan to protect employees in such situations.
With these challenges in mind, here are the five steps to succession planning for your company.
1. Have plans in place
Make sure your business strategy and operating plans are well documented and understood by staff. Assess the overall business risks, including what issues could arise if one or more directors die. These four pillars will help you understand what should happen if disaster strikes.
2. Ensure legal paperwork is up to date
Keep critical documents and processes updated. These include your memorandum and articles of association, which may need refreshing. You also need a current shareholders’ agreement, which is a contract between shareholders stating how they’ll run the company.
3. Set up succession processes
Create a well-rehearsed, documented course of action to roll out if a director dies. Emotions can affect decision-making, but this can be mitigated if staff are well prepared to ensure business continuity.
4. Execute your plan early
A robust succession plan accounts for the skills and experience you’ll lose if someone dies and how you’re preparing to replace them. For example, you could train junior members to take over the role or bring in a qualified interim. Training could take a long time, so start early. Plans should also protect the interests of other stakeholders, such as clients, suppliers and the community – for example, if any charities rely on support from your business.
5. Talk to us
We can help you set up a will, life insurance and death-in-service benefits to protect inheritors. We can also assist with key person insurance and shareholder insurance to safeguard the business.
Putting protection in place early is crucial. The shareholder agreement is the core document as it should set out what happens if a director dies, including who receives their shares, and how to value and transfer them. Make sure all the above documents and processes align and are relevant to the current business.
This can be complicated - for example, if the director owns different share classes or options – so state how the business will resolve any issues fairly for all interested parties. If the right documents aren’t in place, it could leave you open to a long and expensive legal process, and even negatively impact the company. It can take years to prepare your business in a way that’s fair for everyone, so it pays to think ahead.
We can help
Your succession strategy may not be as well rehearsed as the British monarchy’s, but careful plans can mitigate many of the risks involved. For support and advice on these issues, speak to us today.
Read time: 3 min read
Can an organisation continue after the death of an owner or leader? We’ve recently seen the British monarchy’s smooth succession plans in action, but sadly many small businesses aren’t so well prepared.
Too often, small-business owners avoid thinking about what may happen when they, or another director, die and how to plan for it. They don’t consider the skills, knowledge and experience - often not written down – that will be lost, nor how much it could impact employees, clients and suppliers. When a director dies, even simple things can prove challenging, whether that’s authorising bank payments; employing new staff; or even just refreshing insurance.
It can have longer-term impacts too. Often, others in the business will look to take advantage - for example, making a bid for the top job or leading a buyout. The death can create a power vacuum with parties coming into conflict, which can quickly become toxic. Even well-run businesses can unravel quickly without careful succession planning.
What can happen if a director dies
Unfortunately, businesses rarely think about the death of a director until it happens and becomes an urgent, critical issue. So, planning succession as early as possible is vital.
Think about what would happen, for example, if family members inherit shares but don’t want to sell them to the other directors – they may have other ideas about what to do with the business.
There can be emotional challenges, too. If a director dies and leaves the business to their family, they could end up trying to deal with their loss while facing a board of other shareholders looking to push their own advantage. Even worse, family members may argue over the company’s future. Too often, there’s no plan to protect employees in such situations.
With these challenges in mind, here are the five steps to succession planning for your company.
1. Have plans in place
Make sure your business strategy and operating plans are well documented and understood by staff. Assess the overall business risks, including what issues could arise if one or more directors die. These four pillars will help you understand what should happen if disaster strikes.
2. Ensure legal paperwork is up to date
Keep critical documents and processes updated. These include your memorandum and articles of association, which may need refreshing. You also need a current shareholders’ agreement, which is a contract between shareholders stating how they’ll run the company.
3. Set up succession processes
Create a well-rehearsed, documented course of action to roll out if a director dies. Emotions can affect decision-making, but this can be mitigated if staff are well prepared to ensure business continuity.
4. Execute your plan early
A robust succession plan accounts for the skills and experience you’ll lose if someone dies and how you’re preparing to replace them. For example, you could train junior members to take over the role or bring in a qualified interim. Training could take a long time, so start early. Plans should also protect the interests of other stakeholders, such as clients, suppliers and the community – for example, if any charities rely on support from your business.
5. Talk to us
We can help you set up a will, life insurance and death-in-service benefits to protect inheritors. We can also assist with key person insurance and shareholder insurance to safeguard the business.
Putting protection in place early is crucial. The shareholder agreement is the core document as it should set out what happens if a director dies, including who receives their shares, and how to value and transfer them. Make sure all the above documents and processes align and are relevant to the current business.
This can be complicated - for example, if the director owns different share classes or options – so state how the business will resolve any issues fairly for all interested parties. If the right documents aren’t in place, it could leave you open to a long and expensive legal process, and even negatively impact the company. It can take years to prepare your business in a way that’s fair for everyone, so it pays to think ahead.
We can help
Your succession strategy may not be as well rehearsed as the British monarchy’s, but careful plans can mitigate many of the risks involved. For support and advice on these issues, speak to us today.
Read time: 3 min read
Can an organisation continue after the death of an owner or leader? We’ve recently seen the British monarchy’s smooth succession plans in action, but sadly many small businesses aren’t so well prepared.
Too often, small-business owners avoid thinking about what may happen when they, or another director, die and how to plan for it. They don’t consider the skills, knowledge and experience - often not written down – that will be lost, nor how much it could impact employees, clients and suppliers. When a director dies, even simple things can prove challenging, whether that’s authorising bank payments; employing new staff; or even just refreshing insurance.
It can have longer-term impacts too. Often, others in the business will look to take advantage - for example, making a bid for the top job or leading a buyout. The death can create a power vacuum with parties coming into conflict, which can quickly become toxic. Even well-run businesses can unravel quickly without careful succession planning.
What can happen if a director dies
Unfortunately, businesses rarely think about the death of a director until it happens and becomes an urgent, critical issue. So, planning succession as early as possible is vital.
Think about what would happen, for example, if family members inherit shares but don’t want to sell them to the other directors – they may have other ideas about what to do with the business.
There can be emotional challenges, too. If a director dies and leaves the business to their family, they could end up trying to deal with their loss while facing a board of other shareholders looking to push their own advantage. Even worse, family members may argue over the company’s future. Too often, there’s no plan to protect employees in such situations.
With these challenges in mind, here are the five steps to succession planning for your company.
1. Have plans in place
Make sure your business strategy and operating plans are well documented and understood by staff. Assess the overall business risks, including what issues could arise if one or more directors die. These four pillars will help you understand what should happen if disaster strikes.
2. Ensure legal paperwork is up to date
Keep critical documents and processes updated. These include your memorandum and articles of association, which may need refreshing. You also need a current shareholders’ agreement, which is a contract between shareholders stating how they’ll run the company.
3. Set up succession processes
Create a well-rehearsed, documented course of action to roll out if a director dies. Emotions can affect decision-making, but this can be mitigated if staff are well prepared to ensure business continuity.
4. Execute your plan early
A robust succession plan accounts for the skills and experience you’ll lose if someone dies and how you’re preparing to replace them. For example, you could train junior members to take over the role or bring in a qualified interim. Training could take a long time, so start early. Plans should also protect the interests of other stakeholders, such as clients, suppliers and the community – for example, if any charities rely on support from your business.
5. Talk to us
We can help you set up a will, life insurance and death-in-service benefits to protect inheritors. We can also assist with key person insurance and shareholder insurance to safeguard the business.
Putting protection in place early is crucial. The shareholder agreement is the core document as it should set out what happens if a director dies, including who receives their shares, and how to value and transfer them. Make sure all the above documents and processes align and are relevant to the current business.
This can be complicated - for example, if the director owns different share classes or options – so state how the business will resolve any issues fairly for all interested parties. If the right documents aren’t in place, it could leave you open to a long and expensive legal process, and even negatively impact the company. It can take years to prepare your business in a way that’s fair for everyone, so it pays to think ahead.
We can help
Your succession strategy may not be as well rehearsed as the British monarchy’s, but careful plans can mitigate many of the risks involved. For support and advice on these issues, speak to us today.