case history

Max and Jim

Max and Jim owned a company together and wanted to make sure that in the event of one of them dying, the remaining shareholder wouldn’t be left in business with his ex-shareholder’s wife’s 2nd husband (or worse – his solicitor!)

They decided to put shareholder buy/sell insurance in place to cover such an eventuality.  They engaged a Life Broker Specialist to organise this for them.  The Specialist even seemed prudent enough to have both Max and Jim sign a letter to cover the interim situation (until they had a chance to get to their solicitor to execute a full agreement).

However, once the insurance was in place and the premiums paid, the Specialist seemed to lose interest in Max and Jim.  A legal agreement was never forthcoming and Max and Jim, concentrating on making money in their business, put it in the “too hard basket”.

It’s vital to remember that current accounts are “on demand” loans and payable out of after tax company profits.  For every $100,000 current account, an additional $150,000 on taxable earnings is required.  It is crucial that these accounts are recorded in the legal documentation!  

To make matters worse, Max and Jim had current accounts in the company and these were not included in the “interim letter”.   We’ll never know if they were to be included in the “legal agreement” – because there wasn’t one!

In this regard, it’s worth nothing that more private companies are financially hampered (and some destroyed) over current account payments than over shareholder Buy/Sell arrangements.

Names and details have been changed to protect client confidentiality.

"I would advise anybody that finds themselves too busy to sort out the heart of their own company - the part that if anything happened would be strong and keep the company alive - to give Full Focus a call...." more

Read more client testimonials