What is Business Value Protection Trust?

It is legal arrangement between business owners whereby they agree that when one of them exits (due to death, critical illness or total permanent disability), he will sell his portion of shares to the other business owners who agreed to buy at the agreed price.

By setting up Business Value Protection Trust, it will protect and preserve the value of the business when one of the business owners exits. At the same time, it is also to provide for the smooth transition and continuity of business interests to the surviving business owners.

Problems may arise without Business Protection Plan

  • A new partnership is created due to the inheritance of the shares/interest by inexperienced heirs. Chances are this new partnership may fail;
  • There may be serious disruptions and disputes within management as unqualified heirs may insist to be directors of the company and be active in running the business;
  • There is no pre-agreed price for any sale of business interest to take place when the heirs decide to sell to the other business owners. As a result, it may take years to settle a transaction price;
  • It is possible that the surviving business owners may decide to abandon the business and to start their own if matters become complicated for them, especially when the heirs of the deceased wants to get involved in the business. However, starting a fresh new business may take a lot of time and money;
  • The heirs of the deceased business owner will face financial difficulty as there could be lack of cash to pay the deceased’s debts and other financial obligations;
  • Even if the surviving business owners want to buy the shares at a fair price, they may have difficulty in raising money to buy the shares.

After all your hard work in building your business, how can you protect against such problems? The Solution is setting up Business Value Protection Trust.

Our Business Value Protection Trust is the solution to ensure that there is a smooth transition of the business to the other surviving business owners and the value of your share of the business is protected upon the happening of an unfortunate event such as death, total permanent disability, etc.

Benefits of having a Business Value Protection Trust

  • Guarantees the sale of shares/interest at a full and fair value as it was agreed by business owners;
  • Prevents inexperienced and unqualified heirs from being involved in the business or the selling of the deceased’s shares to outsiders;
  • Avoids any argument or negotiation over the purchase price between the heirs and/or surviving business owners;
  • A smooth transfer of outgoing business owner’s interest to the surviving owners;
  • Rockwills Trustee Berhad acts as the Trustee ensures that the outgoing business owner’s interest are properly transferred to the surviving business owners and the sale proceeds are distributed properly without involving the surviving business owners and the heirs of the outgoing business owner;
  • Using life insurance, the purchase of the shares/interest becomes very affordable, minimising the need to use your savings for the purchase;
  • The business carries on like normal and the suppliers/creditors can be assured of the existence of the business. The key employees will be willing to remain within the business due to the smooth transfer of ownership to the remaining business owners.

Our Business Value Protection Trust consists of:

  1. Buy-Sell Agreement: stating the terms and conditions of the sale and purchase including the agreed share value or formula, triggering events of the buy-sell, funding (life insurance and cash) to purchase the business interest and mode of payment.
  2. Irrevocable Power of Attorney by each business owner: authorizing Rockwills Trustee Berhad to transfer the shares/interests to the surviving business owners upon the occurrence of the agreed events that trigger a sale. This eliminates any delay caused as the Executor of the deceased’s estate would need to obtain the Grant of Probate before such transfer can be made.
  3. Trust Deed by each business owner: instructions to Rockwills Trustee Berhad regarding the periodical distribution of the sale proceeds of the shares to the beneficiaries named in the trust deed.
  4. Life insurance policy: to fund the purchase of the shares/interest of the outgoing business owner.

How to set up Business Value Protection Trust: