Planning For The Unexpected

If you and your fellow shareholders own your company and are employed in the business one of your unexpected deaths could have serious and adverse consequences for either the company or the bereaved family.

The main issues that would need to be addressed include:

• What happens to director's loans made to the company?

• Does the company's bank overdraft / loans become repayable?

• The likely loss of profit

• The costs of recruiting a replacement

• What happens to the deceased's shareholding?

Director's loans

In many private companies not all the funding comes from the bank. It is common for shareholders to make directors loans to the company. Such loans can range from short terms loans (e.g. until the company can afford to pay out a declared dividend) to longer term loans. Such loans are not normally documented and in the absence of an agreement there may be disagreement as to when they should be repaid.