If a partner dies or contracts a serious illness their co-partners will, in most cases, have to make a payment to the personal representatives or the partner. The problem with this is, whilst a good going business has been built up, unless there is a proper Partnership Agreement in place, under the terms of the Partnership Act 1890, a partnership will be automatically dissolved on the death of the partner.
Each partner will then have:
This can leave the remaining partners in a difficult position, as they may not have the cash available to repay the capital account. In addition to this, they may then find themselves inadvertently in business with the deceased partner's family unless they have sufficient funds to purchase the former colleague's share in the business.
This means that the jigsaws so carefully put together over the years have to be unravelled piece by piece and put together again with one missing part. The problem is that invariably two boards now have a piece missing, one for the partner's family and the other for the business.
Focusing on the core we will work with the partnership's professional advisers to ensure that an appropriate partnership agreement is put in place. This will allow the remaining partners to continue the business in the event of death or an illness of one of the partners.
To protect the remaining partners and to ensure that the family and dependants are properly remunerated, we work with the partnership setting up individual policies appropriate to the value of each partner's share of the business.
We cover this with a Cross-option Agreement which enables the partner's to purchase the deceased partners shares for a fair value previously calculated and agreed.