Business Value Protection

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If you have started business with partners, you should have an exit plan for your business to avoid creating problems to your family and your partners upon sudden demise, incapacity or ill health.

Having a Business Protection plan, provides a guaranteed sale of the business at full and fair value at an agreed pricing to ensure a smooth and quick transfer of the business sale process without interruption to business operations.

Common problems that arise without proper Business Protection planning: 

  1. A new partnership is created due to the inheritance of shares/interest by the inexperienced heirs. Many intangible factors may result in a higher than usual chance that this new partnership may fail.
  2. There is no pre-agreed price for any sale to take place when the heirs decide to sell to the surviving co-owners. As a result, it may take years to settle a transaction price.
  3. Some of the unqualified heirs may insist to be the directors of the company and be active in running the business. This may lead to unwarranted serious disruptions and disputes within the management.
  4. It is possible that co-owners may decide to abandon the business and start their own due to disputes with the heirs. However, restarting a new business may incur a lot of time & money.
  5. Loss of profits & uncertainty about business future success.

 

Ask yourself:

  1. If a co-owner dies today, can you work with his/her family members to run the business?
  2. Will the co-owner’s family members know how to run the business with you?
  3. Can they work well with you?
  4. Would your beneficiaries able to get a fair price?
  5. Are you able to buy out the co-owner’s shares/interest from the family members where there is no pre-agreed price in a written agreement?
  6. Can the shares you are purchasing be transferred quickly to you?

 

How can you protect your hard work in building your business in the event the  issues cited above occur?

Let us understand your needs and/or worries so that we can provide best solution for you.

 

Here’s an example of an oft typical scenario

Mr. A & Mr. B are childhood friends and become business partners in the manufacturing of children's toys.

Mr. A holds a 60% stake in the company, whilst Mr. B holds the remaining 40% share.

The business grows by leaps and bounds and today annual profits are estimated at RM2,000,000.00.

Their accountant indicates that the business should have a value in the range of RM10,000.000.00.

Tragedy strikes and Mr. B dies in an accident.

Mr. B wrote his will during his life time, giving away his shares of the business to his wife and children, thinking that the company share would be sufficient for the expenses of his suviving family members.

After Mr. B pass away, Mrs. B wishes to dispose her inherited shares of the company to Mr. A.

Mr. A turns her down, as he is already in control and is running the business.

When Mrs. B attempts to dispose of her inherited shares of the company and is unable to find interested outside parties willing to buy her shares, she pleads with Mr.  A to reconsider the purchase of the shares.

Mr. A finally offers her only RM500,000.00 for the shares which in fact are worth RM4,000,000.00.

Mrs. B having no choice, is forced to accept a big loss in value.

To find out which solution best suits you or custom solutions, speak with one of our experienced team members today!