If you are a Business Owner or Shareholder of a Corporation or Limited Liability Company how do you ensure Business continuity if the unexpected happens to you? Would the business survive your demise? How will you and/or your family cope financially without income from the business? Are there things you can put in place to cushion the impact of such a possibility?

1. BUSINESS
CONTINUITY &
SUCCESSION
PLANNING:
CORPORATI
ON Compiled by: Reginald Michael Alleyne

2. Are You Part of a Corporation?
• What are the options if a shareholder dies or becomes disabled?
1. Family of shareholder assumes inactive role
2. Family of shareholder assumes active role
3. Family of shareholder sells shares
4. Shareholder purchases ex-shareholder’s shares from family
5. Shareholder sells shares to ex-shareholder’s family

3. FAMILY OF SHAREHOLDER ASSUMES
INACTIVE ROLE

4. Family Assuming Inactive Role
• Concerns with this arrangement are …
 If the family assumes the majority shareholder’s rights, what direction
will they want to move the business? Would that force you out of
management?
 If the family of the shareholder get minority shareholder’s rights will
they accept your decision or actively pursue their rights?
 Will the family, needing cash flow, push for greater dividend pay-out?

5. Family Assuming Inactive Role
• Concerns with this arrangement are …
 Will the family favour short-term projects to increase cash flow vs.
long-term plans for the business?
 Are you prepared for family members being persistent and voting for
their rights at shareholder meetings?
 Would you want your family to be dependent on the business’ income?

6. Family Assuming Inactive Role: Resolution
• Life/Disability insurance reserve is needed for added security,
family income, the adjustment period and unexpected expenses

7. FAMILY OF SHAREHOLDER ASSUMES
ACTIVE ROLE

8. Family Assuming Active Role
• Concerns with this arrangement are …
 How many family members will want to assume an active employee
role?
 Do family members have management skills and/experience?
 Would family members be able to work with remaining shareholders?
 Would family members accept the direction set for the company?

9. Family Assuming Active Role
• Concerns with this arrangement are …
 Can the company afford the salaries required by the family members?
 Will the family push for dividend pay-out or for reinvestment in the
business?
 How will the changes in the business affect the loyalty of customers?
Suppliers? Employees?

10. Family Assuming Active Role: Resolution
• Life/Disability reserve is needed for added security, family
income, the adjustment period and unexpected expenses

11. FAMILY OF SHAREHOLDER SELLS SHARES

12. Shareholders Sell Shares
• Concerns with this provision:
 To whom would the family likely sell the shares? Why?
 If the buyer is unknown, can the remaining shareholders accept the
unknown person?
 Are they willing to accept the ex-shareholder’s duties, if active?
 Will outside owner accept or resist your plans for the company?

13. Shareholders Sell Shares
• Concerns with this provision:
 Does the new owner possess the skill and knowledge to run the business
“now”?
 Is the person’s personality compatible with all others?
 Would a new owner be able to earn their salary?

14. Shareholders Sell Shares
• Concerns with this provision:
 Would the new owner be willing to forego immediate profit to continue
to build the business or push for more dividends?
 How will this new owner affect the loyalty of customers? Suppliers?
Employees?
 If you were the deceased would your family want a fair price or sell at a
bargain rate?

15. Shareholders Sell Shares: Resolution
• Issues with family/outside owners can be reduced if a properly
managed buy/sell agreement is drafted
• A buy/sell agreement sets the value of the company that is
equitable to both survivors and heirs
• It protects the interests of both the deceased co-stockholder’s heirs
and the surviving stockholders

16. Shareholders Sell Shares: Resolution
• A Life/Disability funded buy/sell agreement:
 assures heirs and survivors of financial security
 helps strengthen current and future credit position
 ensures the continuation of an ongoing business
 helps maintain the value of a successful business

17. SHAREHOLDER PURCHASES EX-
SHAREHOLDER’S SHARES FROM
FAMILY

18. Purchase Ex-shareholder’s Shares
• Concerns with this arrangement:
 Is this a feasible option for each shareholder?
 Is there an agreement in place which fixes the price of the business?
 Price of purchase can be determined by: negotiation after death or prearranged
method
 While negotiation occurs how will the creditors and customers react?
Will prearranged method be viable then as it was when originally formulated?

19. Purchase Ex-shareholder’s Shares
• Concerns with this arrangement:
 Where will the cash be sourced for the buyout?
Borrowed? Personal resources? Sinking Fund?
Will cash be available no matter when a death occurs – tomorrow? Five years?
What happens if the value of the business greatly increases or decreases?
Would the business survive if purchased from working capital/future earnings?

20. Purchase Ex-shareholder’s Shares
• Concerns with this arrangement:
 What provisions are made so that the business can reasonably continue
without any one shareholder?
 How will the purchase affect the loyalty of customers? Suppliers?
Employees?

21. Purchase Ex-shareholder’s Shares: Resolution
• Issues with purchasing an ex-shareholder’s shares can be reduced
if a properly managed buy/sell agreement is drafted
• A buy/sell agreement sets the value of the company that is
equitable to both survivors and heirs
• It protects the interests of both the deceased co-stockholder’s heirs
and the surviving stockholders

22. Purchase Ex-shareholder’s Shares: Resolution
• A Life/Disability funded agreement:
 assures heirs and survivors of financial security
 helps strengthen current and future credit position
 ensures the continuation of an ongoing business
 helps maintain the value of a successful business

23. SHAREHOLDERS SELL SHARES TO EX-
SHAREHOLDER’S FAMILY

24. Shareholders Sell Shares to Family
• Concerns with this arrangement:
 Why would the shareholder choose to sell shares to the ex-shareholder’s
family?
 What will each previous shareholder do for livelihood? Financial
support of their families?
 Where will the ex-shareholder’s family get cash to purchase the owner’s
shares?

25. Shareholders Sell Shares to Family
• Concerns with this arrangement:
 How will the sale price be fairly set?
 Will the family be willing to forego immediate profit to continue
building the business?
 How will the change affect the loyalty of customers? Suppliers?
Employees?

26. Shareholders Sell Shares to Family: Resolution
• Life/Disability insurance provides:
 cash for the purchase of shares by heirs
 income for the decedent’s family
 funds to pay associated business expenses

27. If you would like to discuss in more detail any of
the preceding topics I can be contacted as follows:
†Facebook
†By Email at: rmalleyn1@gmail.com
†LinkedIn: https://www.linkedin.com/in/reginaldmichaelalleyne/

28. Documents that may be requested
• Certificate of Incorporation (Company license)
• Notice of Directors
• Bye-Laws (how the company is governed)
• Articles of incorporation
• Declaration of compliance
• Registered office (notice of address)
• Notice of Secretary