by Aleshia van der Ploeg LLB, Director VDP LEGAL CONSULTING (PTY) LTD
Ever thought about what will happen to your business when you die? No? Well, maybe you should – you are your business’ most important asset! You don’t want your passion, your lifeblood, all your hard work to die with you! Isn’t the whole point of being an entrepreneur to create a lasting legacy – not only for yourself but for your family too!
If you are a sole proprietor or in a partnership, it is very important to execute a Will. A Will is a legal document which governs your estate when you die. Wills are used to direct when and how your estate should pass to your chosen beneficiaries. You can stipulate exactly what should happen to your business upon your death.
A will may include any conditions so long as such conditions are not illegal or contrary to the good morals of society. A will can also include provisions regarding what should happen to your children (guardianship; setting up a trust, etc.) as well burial instructions.
There are various formalities that need to be complied with in order for your will to be valid:
1. It must be in writing;
2. It must be signed at the end of the document by you as well as two witnesses in the presence of each other.
Good practice dictates that the will is signed in full at the end of every page by every party; the will must be dated; witnesses must not be executors, beneficiaries or potential beneficiaries in the Will.
If you don’t have a will, your estate will be governed by the law of Intestate Succession. In a nutshell this means everything will go to your closest living relatives - this may include relatives whom you may not have wished to benefit or may exclude persons whom you would have preferred to benefit – and that relative may not know how or may not be interested in continuing your business…
If you own a company and if you have more than one shareholder, it is very important to execute a shareholders agreement which must include a stipulation regarding what will happen in the event of the death of a shareholder. If you don’t, your shares will pass to your heirs (which may not be in the best interests of your company and fellow shareholders).
Many shareholders take out key-man insurance - A key man insurance policy is usually owned by the company, on the life of an employee, with the proceeds being paid to the company in the event of the employee’s death or disability. The purpose of key-man insurance is to help the company survive the blow of losing the person who makes the business work. Buy-and-sell assurance enables existing shareholders to purchase your shares at a fair value. This ensures business continuity.
Death is not something we like to think about but it is a reality - there are various options available to entrepreneurs when it comes to ensuring your business continues to run after your death and leaving a lasting legacy. Make sure you are prepared!
Aleshia van Der Ploeg LLB (RAU) was admitted as an Attorney of the High Court in South Africa in 2006. She is a member of the Law Society of the Northern provinces. She has 10 years post-qualification experience in corporate, commercial, labour and general law. She practised as an attorney and served as a Director before forming her own consulting firm. www.vdplegal.co.za | Email aleshia@vdplegal.co.za
More articles by Aleshia...
