This series opened by naming a risk most households connected to a business shareholding have never been told about. It closes with a checklist. Six questions, covering both directions of that risk, that turn an accidental silent partner into an informed one.
Work through these with whoever holds shares in your household's orbit or bring them to a conversation with your co-shareholders if you are the one holding the shares.
1. Is there a shareholders' agreement, and does everyone connected to it know it exists?
A signed agreement that nobody outside the boardroom has seen offers little practical protection to the household that would be affected by it.
2. Is the Buy/Sell arrangement inside that agreement actually funded, not just documented?
A funding mechanism, typically Life, Total Permanent Disablement and Trauma cover held on each shareholder, is what turns a written agreement into money that arrives when it is needed.
3. If you or your family member died or became permanently incapacitated tomorrow, what would your household inherit, and is that something you would want?
This is the direction most people think of first: a stake in a business landing in the lap of someone with no interest in running it.
4. If a co-shareholder died or became incapacitated tomorrow, would your household be expected to help fund buying out their share, and could you actually do it?
This is the direction most people never think of, and it is a direct financial exposure for any household connected to a multi-shareholder business, family-owned or not.
5. Does the size of any shareholder's stake change your answer to question four?
This is the one deliberate addition worth sitting with. A minority stake creates a manageable funding gap if it is unfunded. A majority stake, held by a founder or controlling owner, can require the remaining shareholders to raise a sum that puts their own households under genuine strain. If any shareholder in the business holds a majority interest and the agreement behind it is not funded, that is not a planning gap. It is an urgent one.
6. Has anyone in the business actually checked, rather than assumed, that all of the above is true today?
Businesses change. Shareholdings change. Cover levels that were adequate five years ago may not reflect current valuations. An agreement that was funded at incorporation may not be funded at today's numbers.
Where to take this next.
If you answered “no” or “not sure” to any of these six questions, that is a normal and common place to start, not a reason to feel behind.
If you want a starting point today, make contact with me via the contact page on the website. We can then discuss your situation and the steps to support you.
This closes the Silent Partner series. Series 5, The Human Asset, goes deeper into the specific structures, key person cover, personal guarantees, income protection, business continuity and shareholder protection, that answer these questions in full. If any part of this checklist felt close to home, that series is where the detail lives.
Disclaimer: The content shared here is general in nature and designed to broaden your understanding of business risk. It does not constitute personalised financial advice. For advice specific to your circumstances, I recommend speaking with a licenced financial adviser. You can also reach out via the Contact tab at leadyourlife.nz to start a conversation with me directly.