Is it time your business had a health check?

For all businesses the financial year end and start of a new tax year often brings tax efficiencies into sharp focus. This sort of ‘house-keeping’ is a good way to maximise profits yet there are many other ‘health checks’ directors can carry out to ensure business stays on track if the road gets bumpy.

Even if business is booming, there are good reasons for asking a commercial solicitor to run a few simple checks on your business. These can include:

Shareholder Agreements

Shareholder agreements are as fundamental as a seatbelt – you’ll never know how much you need one until something goes wrong. In essence, they set out how the company is managed, the dividend policy, matters relating to the creation, sale and purchase of shares and how they are managed in the event of a dispute.

Cross Option Agreements

Cross option agreements give shareholders the option to purchase the shares of one of their number in the event of their death or serious illness. This can be vital in preventing disruption to the business of the company and provide peace of mind by ensuring that control of the business stays with the remaining shareholders, rather than the family of the deceased owner.

Key Person Insurance

Many small and medium sized companies are dependent on a few specific individuals. Key person insurance protects the business in the event of death or serious illness of one or more key employees. If a key person were to die or suffer severe illness, the key person insurance policy can pay out a lump sum to make up for any losses in revenue or profits, thus helping to keep a business on track if the worst happens. The sums received from the insurance can be used to buy the shares of a deceased shareholder and help ensure that the beneficiaries receive a pay out and the remaining shareholders (or the company) can acquire the shares and ensure business continuity.

Bespoke Terms and Conditions

Self-drafted or ‘off the shelf’ contracts are not always fit for purpose and can expose businesses to liability. It is wise to have your contracts reviewed to ensure they are up to date with the latest changes in the law and do exactly what you need them to.

Business health checks are advisable for start-ups as well as established businesses and can benefit your business at any time of year. For more information email our commercial law specialists Andrew Crabtree (Halifax) or Laura Kurowski (Huddersfield).