YOUR BUSINESS WILL SERIES -Example of Buy and Sell Paperwork not done properly

Two brothers who happened to be twins owned a company equally. The companies value was placed at R 10 m.

They decided to enter into a buy and sell agreement so that, should either of them pass away, the surviving brother can buy the deceased brother shares.

This would eliminate two areas of concern:

  1. That the surviving brother ends up in business with the deceased brothers beneficiaries (in both cases the brother’s wills stated they leave everything to their spouses)
  2. That the deceased brother’s beneficiaries (spouse) get a fair value for their shares.

They then proceeded to take out life assurance R 5m on each other to make sure they had the funds to buy the deceased brothers shares (so brother A took out life assurance on brother B and vice versa).

Once the life cover was issued, they did not do an actual buy and sell agreement. This agreement would bind the brothers to use the proceeds of the policy to purchase the deceased brother shares, and the deceased brother’s executor would be bound to sell the shares to the surviving brother.

Unfortunately one brother died in a car accident and the policy paid out to the surviving brother.

The surviving brother once he received the cash had no agreement that bound him to purchase his deceased brothers shares.

The deceased brother’s spouse now owned 50% of the business as per the will. She then tried to draw an income from the company.

The surviving brother actually went on holiday for 6 months and the business ran itself into the ground. When he came back he offered the surviving spouse R 500 000 for the business.

She having had no form of income had to sell at the greatly reduced amount of R 500 000.

Talk to us about correctly structuring your business will according to your needs.



YOUR BUSINESS WILL SERIES -Example of Buy and Sell Paperwork not done properly