Skip Ribbon Commands
Skip to main content

Buy and Sell Buy and Sell

Invest

Advice

Service

Invest Online Back

Call me back

Email us

Back

Call me back

Email us

Email us

Buy-and-Sell Solution

Who will be your new business partner when your current partner passes on?

Take Control - don't let it be a surprise.

Why you need this

Why Buy-and-Sell Insurance is important.

Get Advice

I would like to speak to an adviser.

More Information

Send me more information.

Keep Me Informed

Not ready yet, but keep me informed.

The Need for a Buy-and-Sell Agreement

When a co-owner in a business dies, the affected owner’s estate can be left severely exposed, but the remaining owners could also face potential problems.

The potential challenges created for the deceased owner’s estate

  • The remaining owners might not have the resources to purchase the shares from the estate;
  • The spouse may not want to participate in the business which means that he/she is left at the mercy of the existing owners;
  • The deceased owner may have had unique skills that he/she brought to the business, meaning that the risk in the business increases if those skills are no longer available to the business;
  • The deceased owner may have earned a salary in the business, and when he/she dies the spouse cannot simply claim that salary unless he/she actually works in the business on the same basis as the deceased owner.

The potential challenges created for the remaining owners

  • The executor of the estate of the deceased owner might interfere in a business about which he/she knows nothing;
  • He/she might want to sell the owner’s interest to the highest bidder, opening up the business to unknown external investors; and
  • The existing owners may not have the funding to repurchase the deceased owner’s interest at that stage.

  • The alternative to insurance through a buy-and-sell arrangement is to borrow, from a commercial bank, the money needed to buy the deceased owner’s share. However, even if the business is successful in obtaining such a loan, the terms and repayment period could possibly make it unaffordable from a cash-flow point of view. In most cases, insurance would therefore be the more affordable solution.

The Solution

The purpose of a buy-and-sell agreement is to provide the surviving co-owners with cash to purchase the interest of a deceased co-owner.

According to the agreement, each co-owner takes out life cover on the other co-owners’ lives. The life cover pays out on the death of a co-owner, which funds the purchase of his/her interest by the surviving co-owner(s).

Disability cover can also be included to fund the buyout of a disabled owner’s share of the business.

Contact Information

Sanlam Business Market Contact Details:

Tel: 0860 100 539
E-mail: sme@sanlam.co.za
Website: www.sanlam.co.za/sme
or speak to your financial adviser.

Business Articles

As a value added service to business owners, we publish free weekly articles covering the following subjects:

  • Business Tips
  • Labour News
  • Economic Overview
  • Sanlam Trust
  • Good News Story

Subscribe to these electronic articles.

Invest

Advice

Service

Invest Online Back

Call me back

Email us

Back

Call me back

Email us

Email us

Sanlam Life Insurance is a licensed financial service provider.
Copyright © Sanlam