This week I was in North Queensland discussing business succession planning with clients. Interestingly when I spoke to their solicitor he advised that he had prepared a partnership agreement for them some 8-9 years ago and on reflection he advised that it had still not been signed. Obviously with my questioning he was quick to suggest that he would immediately contact the clients again to update their instructions. But as in all these cases it is too little, too late.

What it does is reflects on the fact that solicitors are not paid nor do they have a habit of following up when instructions are not completed, signed and followed through. Naturally when I turn up on the scene rattling the can, everyone gets very nervous and goes into overdrive to protect their own reputation.

But the main point here is it was 8-9 years ago that the draft was sent to the legal firm by the clients and the clients have never taken action and no one has ever tried to follow up the clients to ensure this document was completed.

As well, a separate issue with these clients was that insurance policies had been set up to fund the buy-sell agreement. In fact that agreement had never been completed. To top it off the life insurance policy ownership was set up to be owned by the company so in fact if one of the partners had died all that would have achieved is to have injected a whole lot more money (let’s say $1 million) into the business. That would lead to the remaining partner having to find another $500,000 to buy the now inflated share of the deceased.

As you can see these things lead to absolute disasters, and that’s why it’s so important to make sure that the documentation, the ownership and the funding is all reviewed by an independent person who doesn’t have a vested interest in any of the individual issues.