As a business owner you and your business partners would have spent many hours of hard work building to what it is today. You and your loved ones are now enjoying the fruits of your labour.
However, you may not have given enough thought about an exit plan from the business. I am sure you would want to avoid what was faced by Mr. Yow and his family as illustrated below.
[The following is an adaptation based on a true story. The names have been changed to protect the identities involved.]
“Mr. Yow Sang Yee was a successful businessman. He had joined his childhood friend, Mr. Tai Sek Sai, to start a factory manufacturing carpets. Mr. Tai had a 60% share of the business while he had the remaining 40%. Ever since they started, the business had grown by leaps and bounds. Annual profit was now in the region of RM2 million. Their accountant had indicated that the business should have a value in the range of RM10 to RM15 million.
Then tragedy struck. He was diagnosed with third stage cancer of the liver and his health deteriorated. He wrote a will to give his assets to his wife and children. He took comfort in the thought that the value of his share of the business alone was enough to take care of his family comfortably and see his kids through their tertiary education. He also felt comfortable that his partner would not short change him as they had been childhood friends and had gone through thick and thin together for so many years.
After Mr. Yow’s departure, the wife wanted to dispose of his shares but Mr. Tai turned her down because he was already controlling and running the company.
Unfortunately for her, no outside party was willing to buy her shares and she had no choice but to plead with Mr. Tai to reconsider the purchase of the shares. He offered her a price of only RM1 million, rather than RM4 to RM6 million, which she had no choice but to accept it.
The above story illustrates the dramatic drop in value from business disruption due to the loss of a co-owner or partner and sometimes even the downfall or closure of the business that could have been avoided.
A well-constructed plan is essential to protect the value of the business in the event there is a major disruption in the business due to a co-owner’s death, disability, retirement or serious major illness or any other event that jeopardizes the continuity of the business.
Ask yourself:
• If a co-owner dies today, can you work with his family to run the business?
• Will the co-owner’s family members know how to run the business with you?
• Can they work well with you?
• Would your beneficiaries be able to get a fair price?
• Do you have the funds to buy out the co-owner’s shares/interests from the family members when there is no pre-agreed price in a written agreement?
• Can the shares/interests you are purchasing be transferred quickly to you?
Our Business Value Protection Trust provides the solution and,
• It guarantees the sale of shares/interest at a full and fair value that was agreed by co-owners;
• It prevents inexperienced and unqualified heirs from being involved in the business or the selling of the deceased’s shares to outsiders;
• It allows for the smooth transfer of ownership to the co-owners at the point of exit;
• It enables your co-owner(s) to purchase the shares/interest by way of life insurance where it becomes very affordable, minimizing the need to use their savings for the purchase;
• Rockwills Trustee acts as the Trustee acting impartially according to the terms of the agreement, providing protection to your loved ones and that of the co-owners; and
• Your loved ones will receive cash for the use of your beneficiaries in their time of need, instead of the shares/interests which may be difficult to dispose of.
If you would like to avoid what Mrs. Yow had to go through, email me at shpoh88@gmail.com for a free presentation to explain further on the details of the Business Value Protection Plan.
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