Maybe you’ve arranged income protection insurance to make sure that your family isn’t left high
and dry if things go pear-shaped. That’s great, but from a business perspective, there’s more to it.
So, what happens to your business if you or your business partners get too unwell to work?
Paula Lines from The Law Shop explains that if you have a company and are the sole director, you
should ensure that the company has appointed an attorney so if you become too unwell, someone
else can make decisions on behalf of the company.
“It’s a simple document, but it saves having to appoint a new director to replace you when you
expect to recover and be able to take over again. The power of attorney document you’ve signed
for your personal affairs isn’t going to give that person power to act for you as a director,” she says.
“If there is more than one director, you may want to ensure that your constitution allows for one
director to make the decisions rather than having approval and a signature required from two or
more of you.”
Then there’s also the consideration that you may need to employ someone while they are out of
action. Have you put plans in place to make sure you can afford that?
What if one of you dies, how does the business keep operating? How does the deceased’s interest
get paid out? There’s a lot to consider, and you should get your ducks in a row well before things
happen. Expect the unexpected!
What you should do first, says Paula, is talk to an insurance broker about getting appropriate key
person insurance cover, then get your lawyer to draw up a Buy-Sell Agreement.
“Key person insurance is owned by the business, and the Buy-Sell Agreement records how the
business will spend the insurance proceeds to replace the key person, and to pay that person’s
family for their interest in the business,” she explains.
“No one likes to think about these things, but a Buy-Sell Agreement can save a business when one
partner dies unexpectedly, and the others are scrambling to keep things going.”
As with anything in business and life, things are so much easier when all scenarios, both good and
bad, are carefully planned for. No matter what, things will be less stressful if you have the required
paperwork in place.
If you would like to know more about how The Law Shop’s team of business law experts can help
you be best prepared for any situation, call the friendly team on 0800 LAW SHOP and book in an
appointment. The Law Shop in Tauranga now operates from a virtual office, while the firm’s Rotorua
office on Arawa Street remains open as usual.