Business Succession Agreements


Types of Agreement:

Types of Agreement

Cross Ownership:

Cross Ownership

Self Ownership:

Self Ownership

Related Party Vendors

Deemed Dividends

Risks If No Agreement

Trust Ownership:

Trust Ownership

Tax Implications

"Business Family Will"

Changing Needs


Choice of Trustee

Super Buy/Sell


Drafting Issues:

Put Options

Call Options

Put and Call Options

Conditions Precedent

Put and Call Options vs. Conditions Precedent


Other Issues:

Pre-Agreed Purchase Price

Inadequate Insurance Proceeds

Trauma Buy/Sell Strategy

Simultaneous Deaths


Debt Reduction Agreement:

Debt Reduction Agreement










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 Agreements

IGS offers a number of alternative Business Succession Agreements on a Fixed Fee basis:

IGS 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 IGS Simple Succession Agreement with Traditional Self-Ownership Buy/Sell Agreements

The standard version of the IGS 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:

  • It includes provisions for Death, TPD and Trauma Buy/Sell arrangements within the standard Legal Fee;

  • It includes provisions for Retirement and other Uninsured Events within the standard Legal Fee;

  • It pre-agrees the Purchase Price, unless the parties wish to rely on a valuation at the time of a sale;

  • It includes Vendor Finance Provisions with respect to any shortfall in the Insured Purchase Price within the standard Legal Fee;

  • It includes Super Buy/Sell Provisions, if required by the Adviser and Clients

  • The Legal Fees with respect to the Initial Agreement and any future Variation Agreements are fixed.

Click here to read a comparison of the benefits under the IGS and traditional Self-Ownership Buy/Sell Agreements.


Fixed Legal Fees

The Fixed Fee charged by IGS 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.


Copyright: Ian Gray Solicitor



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.

See more Adviser Tips

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