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Overview: Business Succession Agreements
Types of Agreement: Cross Ownership: Self Ownership: Trust Ownership:
Drafting Issues: Put and Call Options vs. Conditions Precedent
Other Issues:
Debt Reduction Agreement:
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Types of Business Succession Agreement
Historically, there have been three alternative types of Business Succession Agreement:
Cross-Ownership Agreements No Longer Used A Cross-Ownership Agreement requires the Proprietors (other than the Life Insured) to own each Buy/Sell Policy. It is no longer normal for the Business or the Purchasers to own Buy/Sell Insurance, because of the CGT liability with respect to Non-Death Benefits. As a result, it is no longer normal to use Cross-Ownership Agreements.
Two Current Alternatives In general, there are now two appropriate types of Business Succession Agreement: The type of Agreement reflects the ownership of the Buy/Sell Policies. However, it also has implications for the scope of the Succession Plan and the ownership of other Business Insurance (such as Debt Reduction Cover and Key Person Insurance).
Simple or Complete Succession Plan The two alternatives give the Business a choice of Agreement, depending on whether it requires a Simple Succession Plan or a Complete Succession Plan. Click here to read about the difference between the two types of Succession Plan. The Fixed Fee depends on the choice of Agreement. Alternative Business Succession AgreementsClover Law offers a number of alternative Business Succession Agreements on a Fixed Fee basis: Clover Law can use any one of the Agreements to document a Simple Succession Plan. However, it uses either a Complete Succession Agreement (Single Policy-Owner) or a Complete Succession Agreement (Multiple Policy-Owner or Hybrid Agreement) to document a Complete Succession Plan.
Comparison of Clover Law Simple Succession Agreement with Traditional Self-Ownership Buy/Sell Agreements The standard version of the Clover Law Simple Succession Agreement gives Business Proprietors a number of additional benefits that are not provided by traditional Self-Ownership Buy/Sell Agreements within the standard Legal Fee:
Click here to read a comparison of the benefits under the Clover Law and traditional Self-Ownership Buy/Sell Agreements.
Fixed Legal Fees The Fixed Fee charged by Clover Law depends on the choice of Agreement. Click here to see the current Fees for all Agreements and Services. These Fees apply subject to the Legal Fee Policy.
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Adviser Tip It is no longer normal for the Business or the Purchasers to own Buy/Sell Insurance, because of the CGT liability with respect to Non-Death Benefits.
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