Things Change when Money is Involved

on 23 June 2014

When I set up in business in 1998, my father gave me some very sage advice. He told me to prepare everything required in case the business folded.

At the time, this seemed crazy. Why would I worry about what happened if it all went wrong just as I was starting out? Not exactly a positive mind set!

But over the years the wisdom of this advice has been made apparent on a number of occasions.

For example there was the business set up by two friends. They didn’t see the point in a written agreement. Actually, they thought it was a bit of a game when I would keep nagging them to send back the paperwork.

Then one sadly died of a heart attack. The other gave a touching speech at the funeral. A few weeks later he informed the widow that she should give the shares to him without expecting payment for their value, and if she didn’t he would wind the company up and start a new one.

Things change when money is involved.

Another instance was the director who had an affair with a member of staff. His wife told him not to set foot in that office again, making him choose between the company and the family. They had a shareholder agreement in place, which included a ‘bad leaver’ clause protecting the company. Without that agreement the remaining directors would have found it very difficult to continue operating the company in a profitable manner.

Finally there was the company who had life assurance in place on all the directors, so that if one director died then the others had the cash to buy the shares from the widow. Trust documents and agreements were signed as well as a shareholders agreement, everything was neat, tidy, and the directors knew that every possible eventually had been catered for.

Then, suddenly… no-one died. This particularly story has a happy ending, at least so far!

It’s not always nice to think of bad things that might happen, but forward planning is the only way to ensure that nasty surprises don’t lead to unpleasant outcomes.

Our coaching experience can help directors to talk through these issues, our legal contacts can help draw up the agreements, our accountancy contacts can help with valuations, and our financial planning team can help set up the life assurance policies. Give us a call.

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