Businesses and their employees face new challenges every day, and are often at the mercy of life’s unexpected occurrences. Unforeseen illnesses or deaths of crucial business members or executives can pose significant challenges to a business’ immediate or long-term profitability and sustainability.
If you own or manage a business, it is crucial you consider what plans and procedures your organisation has in place to ensure its viability and financial stability should you or other integral members of the organisation become ill, be rendered incapacitated, or decide to cease employment with the company. The most effective method to strategically prepare is through Business Succession Planning.
Business Models
Each business succession plan is unique – your business’ ideal and most suitable succession plan will likely depend on your organisation’s legal structure and internal governance framework. In effect, whether your business is a partnership, a small business, a corporation under the Corporations Act 2001 (Cth), or another business model altogether, as well as how your business is managed internally – this will affect your organisation’s most appropriate and practical business succession pathway.
For example, if your business is incorporated under the Corporations Act[2], it enjoys perpetual succession, meaning the company survives as its own legal entity despite the incapacitation or death of a director or member, and will retain its assets and contracts upon sale of the business. If your business exists as a partnership or sole trader arrangement, however, additional steps and obligations may exist – potentially requiring the assignment of obligations from the original person to another specified person (the successor).
To better understand your business’ obligations, do not hesitate to contact one of Corney & Lind Lawyers’ commercial team specialists so we can help get you started.
Succession Planning Considerations and Benefits
A well-formulated and detailed Business Succession Plan is fundamental to the effective transfer of your business to your successor. The earlier you can organise your plan, the sooner your business will be prepared for the unforeseen challenges that will arise in the future.
Carefully crafting your succession plan can help you address a range of elements that you should be taking into account to ensure your business is appropriately prepared for the best possible future. These might include[3]:
- Who your successor will be, and how you will prepare them to succeed?
Making sure your successor is the most qualified person with a strong passion and business drive is essential to ensuring the business can be led effectively into the mission and vision for which it was conceived. If you believe your desired person is not quite ready to take the reins of the business, having an idea of proposed avenues of training is also beneficial.
- Finances?
For example, if you are selling your business, you will need to have an understanding of the worth of the business and its valuation. Do any taxation obligations apply to your business in its transition? Are there any hidden financial opportunities that can be seized for the business whilst transitioning? How will you strategically minimise financial risks? These are some of the considerations Corney & Lind Lawyers can help you plan for.
- What legalities must you take into account?
Queensland business succession principles are determined and governed by Queensland contract law[4], as well as the Corporations Act (if your business is incorporated under this legislation). Corney & Lind Lawyers’ team of commercial specialists can help you navigate the legal intricacies required to help your business transition effectively into the future.
- Timing and organisational operations elements?
Business succession planning allows you to have a clear idea of the exact timeframe for your transitions, and precisely define the nature of the tasks and responsibilities your successor will have. This might also include any informal changes to business structures and hierarchies (that might result from your absence), role-restructuring or redefining internal management processes. This facilitates the smoothest possible transition and minimises unnecessary or unforeseen consequences for your executives, employees and consumers.
How can Corney & Lind Lawyers Help You?
At Corney & Lind Lawyers, we are dedicated to seeing your business thrive and be ready and prepared for its next step. Our Brisbane-based lawyers can assist you in developing and implementing a Business Succession Plan tailored to suit the needs of your business. In doing so, Corney & Lind Lawyers can:
Business Succession – Implementation documents (fixed fee)
The implementation documentation may include:
- Deeds of Variation of Trusts
- Company Constitution amendments
- Amendments to or Key Short Form Shareholders Agreement
- Buy/Sell Agreement
- Wills
- Enduring Powers of Attorney
Contact Us Today
Call our client engagement team for a meeting with one of our commercial team lawyers on (07) 3252 0011.
This article was edited by Jackson Litzow (student placement).
Footnotes
[1] Australian Unity Fact, ‘What is Business Succession Planning’ Australian Unity Fact Sheet (Webpage, November 2018) https://www.australianunity.com.au/wealth/~/media/publicsite/documents/financial%20advice/factsheets/business_estate_planning/business%20estate%20planning.ashx?la=en.
[2] Corporations Act 2001 (Cth) s 119.
[3] Australian Government, ‘How to develop your succession plan’ Australian Government Business (Webpage, 19 August 2020) https://www.business.gov.au/Planning/Business-plans/How-to-develop-your-succession-plan.
[4] Wolters Kluwer CCH Intelliconnect, Essential Australian Business Law 2014, 2nd Edition: Commentary, (online at 25 March 2020) [¶6-450] ‘Company: continuity of existence/perpetual succession’)
