Online Registration for Rockwills Sdn Bhd and Partnership Buy Sell Agreement and Family Business Trust

SEMINAR FEE on this course

Rockwills Member : RM250/pax
Rockwills Member (Refresher) + 3G : RM80/pax
Non-Rockwills Member : RM450/pax
Non-Rockwills Member (Group of 3 persons): RM400/pax
Non-Rockwills Member (Group of 6 persons): RM350/pax

Payment:

Kindly transfer the payment to the following Bank Account payable to Rockwills Business Solutions Sdn. Bhd.
Bank Account:
CIMB Bank : 1428 0004 2260 55
RHB Bank : 2121 9800 0198 20
Email the bank in slip to info@malaysiawills.com

WHO SHOULD ATTEND

• Company Secretaries
• Accountants and Tax Agents
• Financial Planner and Advisors
• Insurance Consultants
• Unit Trust Consultants
• Bankers and Lawyers
• Professional Estate Planners
• Financial Intermediaries

*Seminar fee is inclusive of seminar materials, certificate and tea breaks.

15 CPD Hours Accredited by Malaysian Financial Planning Council

Course Introduction: This 2 days course will cover on two topics: Rockwills Buy Sell Agreement (Business Value Protection Trust) and Family Business Trust

Rockwills Buy Sell Agreement Business Value Protection Trust. Business value protection or business succession involves planning for the smooth transfer and continuation by the co-owners due to retirement, death, illness or disability. This seminar addresses the key questions for business owners such as:

1. When a business owner decides to retire or suffers a life threatening illness or dies, is there a proper exit strategy put in place?
2. Is the exit strategy stated in writing to ensure smooth transfer and continuation of the business? Has it been structured properly?
3. In the event of death or disability, can the heirs of the business owner manage the business with the co-owners? If no, will the heirs be compensated in any way to ensure adequate income for them?
4. Will the co-owners have the available funds to purchase the business owner’s interest or shares when the time comes to do so?

Rockwills Family Business Trust
Family Business Trust creates a structure for the continuation of the family business with or without the involvement of the family members. The existence of family participation in the business directly or indirectly, can strengthen the company because family members are often loyal and dedicated to the family enterprise. However, family participation as managers of a business can present unique problems because the interests of a family member may not be aligned with the interest of the business.
Through the application of various strategies, Rockwills Family Business Trust is designed to benefit the family members to receive the dividend income from the trustee and the profits generated by the business to ensure the continuity and preservation of the business within the family. More mportantly, the strategies used are to ensure  that the business is managed by a competent person overseen by the Board of Directors.

This seminar will provide an in depth understanding on the estate planning options and tools that are available to preserve family business and the relevant information required to structure a proper 3G Family Biz Trust.

KEY TOPICS
1.Types of business suitable for Business Value Protection

• Partnership, private limited company and public listed company

2.The Business Value Protection concept

• Protecting the business value
• Problems involved without the protection
• Outline of the components for Business Value Protection
• Funding: insurance and alternatives for Muslims and non-Muslims

3.Components of Business Value Protection

• Buy-Sell or Buyout agreement and issues for consideration
• Option agreement – when it should be used and issues for consideration
• Power of attorney – types and usages
• BVPT – structure and important elements for Muslims and non-Muslims

4.Critical analysis of some existing plans

• Without power of attorney and trust
• Funding by Key-man insurance

5.Advantages of Business Value Protection Trust package

6.Estate Planning Options to a Family Business

7.Objectives of Setting up a 3G Family Trust

8.Exploring Available Tools and Technicalities

• Testamentary trust, declaration of trust and living trust

9.Type of Beneficial Interest Suitable

• Fixed and discretionary

10.Terms of Trust

• Parties involved, protective committee, trust asset, trust period, qualification of and disqualification of beneficiaries and meetings.

11.Instruction taking, documents required and possible M&A amendments

This 2-days HIGH impact seminar aims to help you to:

1. Identify opportunities for estate planning, especially for business value protection.
2. Know how to ask relevant and important questions to determine the need for business value protection.
3. Learn how to answer clients’ questions on the structure of business value protection and ancillary matters such as the valuation, funding, agreement, tax implications, power of attorney and usage of trust
4. Fully utilize insurance planning as the funding option to help clients, hence get bigger insurance cases.
5. Understand how certain existing funding & structures without the components of business value protection can cause material losses to the clients & their heirs.
6. For family business, the available estate planning tools to ensure that the business is kept within the family and managed by qualified heirs or appointed professionals
7. The relevant questions to ask to structure a proper Rockwills Family Business Trust.

SPEAKER PROFILE

En. Azhar Iskandar Hew is the Senior General Manager of Rockwills Trustee Berhad and holds the Bachelor of Laws (Honours) degree from the University of London. He is also a Director of Rockwills Advisory Services Sdn Bhd. He has more than 16 years experience in the estate planning industry as a will & trust specialist, trainer and conference speaker. Over the years he has trained more than 6,000 people primarily from leading financial institutions and life insurance companies as well as inancial planners in Malaysia, Hong Kong and Singapore. He is approved by Securities Industry Development Centre (SIDC) as a facilitator to conduct estate planning training and is an Estate Planning Trainer for Certified Financial Planning (CFP) as well as a Certified Registered Financial Planner (RFP) Trainer by the Malaysian Financial Planning Council (MFPC) for the Estate Planning module of the Registered Financial Planner course. His current scope of work includes advising on legal aspects, compliance and advisory matters regarding Estate Planning, Private Trust and Corporate Trust services. He contributes regularly to Smart Investor and Malaysian Business on the areas of Estate Planning and Private Trust.

Rockwills Trustee Senior GM, Mr. Azhar Hew

Title for Mar 2012: 何时应该开始规划企业王朝的延续 ？

上一期的《企迹》文章里，我分享了“一代富老子， 二代花公子，三代穷孙子“在马来西亚中小型企业普遍发生的事实。这一期，让我们探讨一下 “一代富老子”还没成为“富老子”的创业心路历程及企业家会在何时应该开始规划企业王朝的延续。

创业家刚开始的时候，生意才刚起步及求生的阶段， 老板想的自然是如何求生存。平稳了过后， 有80% 的生意开始经不起竞争，挣扎了一段日子， 便被淘汰掉。有20% 的生意， 因为天时，地立， 人和的种种因素， 才会脱颖而出，达到突破而成功， 接着下来， 只有10% 的创办人及他的团队会运用科技及系统来强化自身的企业。那很可惜的是，再成功的企业，如果没有完善的延续经营规划， 很难达到代代相传，延续的圆满静界。

Rockwills article to Qiji mar 2012

企业有两种： 一种是跟朋友合伙， 一种是家族企业。如果是跟朋友合伙， 那应该要规划，万一无常的到来，如何将自身的股份在合理的价格范围出售给其他股东。如果是家族企业， 那当您觉得企业有赚钱或发展的潜能，应该规划如何让家族下一代延续下去。

以我过往的讲座经验，很多企业家会问我一个问题， “企业应该在何时想要做规划呢？” 其实没有绝对， 可是我的答案是“如果企业家的生意超过10年， 就应该开始规划， 为第二代铺好路， 无论在生意方面， 思想， 教育， 员工管理，供应商及客户处理。“ 有人会问， “为何是10年 ?”。 跟据我们的发现， 如果一个企业可以经历10年而不倒的话， 那代表着这个企业已经平稳和有一定的企业文化及内在系统，很大机会可以再创高峰， 继续发展。

那这个企业的创始者，应该在这时后开始用心去想一想， 规划好企业王朝的延续 （见图表红色的指标）

下一期再见。

MalaysiaWills CEO, Evanna Phoon.

作者简介：

Evanna罗慧庭是www.MalaysiaWills.com的CEO和创办人。她在2009年看准了网络的功能， 并大胆的成立了网上立遗嘱网站www.MalaysiaWills.com。 2012年3月， 她成为马来西亚第一位通过网上讲座会 (Webinar) 成功推销遗嘱及信托服务的企业家。 Evanna是多家大马中小型企业的信托顾问。她目前为多家杂志提稿， 包括Malaysia SME 报纸，MyStudy.my, 精明理财, Money Compass，妇女管理学院特刊（Women’s Institute of Management Journal） 等。

网址：www.malaysiawills.com

电邮: info@malaysiawills.com

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Rockwills Evanna Phoon

Evanna Phoon would like to invite you to attend a seminar which she has attended and found to be a great value for the public, especially SME business owners or accountants.

Below are the details of the FREE seminar

Speaker: Ms Shin Yap

• Title: How to handle with Tax Audit and Investigation 
• Speaker: Ms. Shin Yap, Tax Director 
• Fee: Free
• Date: 15th May 2012 (Tuesday)
• Time: 10.00 am to 12.00pm (Registration starts at 9.30am)

Venue:

17 & 19, Jalan Brunei Barat, Pudu,
55100 Kuala Lumpur. 
(Behind Shaw Parade)

This Workshop Provides an understanding of how IRB Officers carry out tax audit and investigation and what are your rights as tax payers.

Rockwills, Rockwills Malaysia, Will Writing

Family Businesses are very complicated and they are a few key concerns among them when passing on their wealth to the next generation or generations to come. One key concern is on their asset protection, they want to know how to ensure that how do they protect all their hard-earned money. One concern is adverse claims.

If the founder passes the wealth or business directly to the child’s name, normally businessman hope that their sons or daughters will inherit some entrepreneur genes. Being entrepreneur means that their children are dynamic, getting into business ventures, always looking out for business opportunities and giving out personal guarantees for loans and if in the event if there’s an adverse claim, everything in the child’s name is subjected to creditor’s claim. It can also be a child that’s practicing as a professional, for example a specialist and due to negligence, the child caused a death of his/her patient. Now, the claim will be severe and running into millions. So long as the child owns the asset, it’s subject to claim due to negligence. Or in the event the child is driving and accidentally knock into someone and this accident victim happens to be someone of high potential, the claim can run up to millions.

So long as you have asset is in the child’s name, you gift it to your child during your lifetime or you pass it down through a will, that asset in your child’s name, it’s subject to adverse claims. We won’t know what will happen.

Claim arising from marriage. There’s a saying, “The best of children also can make a bad marriage.” Divorce rate is getting higher and higher. Divorce distribution formula is different in different country, depending whether the country has “inheritance concept”, means the inheritance is not counted in as asset accumulated during marriage. Some country, they look at what has become family asset?

The recent huge settlement divorce case has rocked Hong Kong, Florence Tsang Chiu-wing received more than HKD $ 1.2 billion as part of her divorce settlement after splitting with her real estate tycoon ex-husband, Li Kin-Kan. A quote from CNN says Florence’s case seals Hong Kong’s reputation as Asia’s divorce capital. ” This suggests that the way local court rule, if your loved ones are loaded, you can expect to live large and leave large.”

Rockwills, Rockwills Malaysia, Will Writing

The divorce pay-out represents 20% of his asset and it’s the “sharing principle that guaranteed the wife’s settlement.

This concerns a lot of people especially the founder of the business saying this is my wealth; I worked hard and accumulated all the assets. I then give this asset to my son and the next minute, my daughter in law gets a divorce with my son and she gets a portion of my asset. How can they protect against this claim?

The next concern is country and political risk. Some business owners concern that if all their assets are within one country, it’ll be riskier. Basically, they don’t want to put all their eggs in one basket. They would like to put some of their asset outside their home country, spreading it out in a different environment or country, just in case anything happens, just like what happen to Indonesia a few years ago. Country and political risk is something very out of our control.

Some families are worried about spendthrift children or grandchildren. They hope to set up certain structure to protect their children against themselves. Let’s say the child is a gambler, we all know that the parents can give and give and everything is gone because gambling is a bottomless pit.

We’ll explore more on how to pass wealth across multi generation of Malaysia SME families in the next issue… Stay Tuned.

About the Author:

MalaysiaWills CEO Evanna Phoon

Evanna Phoon is CEO & Founder of www.MalaysiaWills.com, Malaysia’s first online will writing service provider for Rockwills Corporation Sdn Bhd & as-Salihin Trustee Bhd. Visit her website to download FREE ebooks  www.MalaysiaWills.com & watch over 300+ videos on the topic of Will Writing for Personal & Business. She can be contacted via info@malaysiawills.com.

My Sibu Franchisee, Cecilia Wong & her friends organized a talk in Sibu on 7 April 2012 and invited Mr Azahar, Senior GM of Rockwills Trustee Berhad & I. The topic was Family Business Trust: How to Preserve Wealth Across Multi Generations.

About 200 people turn up on that day. During our stay, we were brought around for good food around Sibu by our friend, Eric Chiew. Thank You all that help to make this event a succesful one.

Also, thanks to Sibu Press that we were widely feature in local newspaper …

In the previous six issues, we have been exploring very in-depth on business exit planning with a proper buy sell or cross option agreement. As I mentioned in my first issue, there are basically two category of business.

1. Business partnerships among friends, sibling and relative
2. Business among family member or family owned business

Business exit planning is used when planning for the first category of business partnership. For the second type of partnership, the planning is completely different as the business owners have no intention to sell the business interest to an outsider but they hope to pass down their wealth and business legacy that they build to their descendant.

In summary, the exit planning for a family owned business is family succession.

Before we go into the technical details and how-to plan for a successful family business succession for family businesses. We’ll share a bit more about some unique facts of Malaysia SME families. In Malaysia, the family base keeps on growing larger and larger by generation and will be in a form of a pyramid shape. For example, a couple might have four children and the four children will get married and have a couple more children of their own. The multiplication goes on. In fact, this is what happens to most of Asia family except for China.

Rockwills, Rockwills Malaysia, Will Writing

In china, the wealth of a couple in family business will pass down to their only child. This only child then marries to the only child from another family and their wealth will then be channelled down to their only child.

Therefore, planning for Malaysia SME is vastly different from planning for a China SME. It requires a lot of time and effort to scope out the unique characteristic of each family business.

The next scenario that we commonly see among Malaysia SME family business is that their assets are diversified across different jurisdictions or countries. It is not uncommon for Malaysia SME business owners owning properties outside of Malaysia, for example a house in Scotland, a bungalow in Australia, an apartment in America, or some public listed shares in NYSE etc. This diversification will create complication when the business owners eventually pass away. The reason is because some countries will have inheritance tax and by owning a property in that country, then they will be subjected to pay for the inheritance tax for that country.

One simple example that I’ll illustrate here is, a Malaysian Business owner bought a property in London because his daughter is studying there. If upon his death the property is worth £1million, the UK government will be imposing an inheritance tax of 40% off nil band rates.

That is the reason why business owners should always think carefully and get professional advice about the exit strategies before purchasing any property or engage in any joint ventures partnerships in foreign countries.

Besides properties being diversified globally, their family members might also be geographical dispersed across different countries. Most of Malaysia SME families that we talk to tend to their children to study abroad, outside of Malaysia. They might have a son in Australia, a daughter in Canada, another daughter UK. And after they send the children overseas, they can’t tell them not to fall in love, not to get married and settle down overseas. Some children might choose to settle down overseas due to work commitments. In the event they get married, for example the daughter married to a Canadian. It’ll pose certain challenge when it comes to passing on properties to the daughter.

Let’s say the mother blessed her daughter (that married to the Canadian) with a RM 10 million worth of properties in Malaysia and the annual rental collected is RM 1 million. Because Canada practices worldwide taxation, therefore any income arises outside of Canada will all so need to be reported to the Canadian government. This means that from the RM 1 million rentals collected, a portion of the income will be taxed by Canada government. This is where proper exit planning is needed.

In the next issue, we’ll explore on the key concerns of Malaysia SME with regards to their family business, family wealth and family legacy.

About the Author:

MalaysiaWills CEO Evanna Phoon

Evanna Phoon is CEO & Founder of www.MalaysiaWills.com, Malaysia’s first online will writing service provider for Rockwills Corporation Sdn Bhd & as-Salihin Trustee Bhd. Visit her website to download FREE ebooks  www.MalaysiaWills.com & watch over 300+ videos on the topic of Will Writing for Personal & Business. She can be contacted via info@malaysiawills.com.

In the previous section, we have discussed the two examples with some existing business exit planning, firstly, to save cost, some business owners execute it’s business exit plan without the appointment of a trustee and power of attorney. Secondly, the distributions of sales proceeds were not well thought off. Resulting in more trouble and hardship to the beneficiaries.

In this issue, we’ll explore two more examples on business exit plans or business succession plans executed by business owners that are done wrongly & defective in some ways.

a)    Using keyman insurance to fund the purchase of the shares

Many business exit plans created using the insurance proceeds from keyman insurance policies. In summary, a keyman insurance policy is a policy that is insures the life of key personnel of the company. It is paid for by the company and therefore, this keyman insurance policy is owned by the company, rather than by the key personnel. The idea behind keyman policy is to compensate the contracted amount to the company for the financial losses that would arise from the death or total permanent disability of the key personnel mentioned on the insurance policy. This insurance policy facilitates the continuity of the business.

When a keyman insurance policy is used for business exit plan, it will be caught under section 67 of the Companies Act 1965. It prevents a private limited company from purchasing its own shares or to provide any form of financial assistance to the shareholder or any third party directly or indirectly to purchase the company shares of another shareholder. As such, when the proceeds are used to purchase the shares of the deceased shareholder, whether it is disguised as gratuity to the family or not, on the understanding that such payment is in exchange of the shares of the deceased shareholder, it will be caught under section 67 of the Act.

The Directors of the company will be held liable when the company is found to infringe section 67. The penalty faced will be a fine of RM100,000 or 5 years imprisonment or both.

a)    Payment of insurance premium by the company

As mentioned in the earlier articles, the business owners are to pay for the premium using their personal funds. If the business owners are Directors, he will be able to use part of the Director’s fee received to make such payment. If he is a shareholder, then any dividends received can also be used to make such payment. The company is not allowed to use its funds to pay for the premiums (whether or not it is categorised as deductible expenses or not) and if it does, it will contravene section 67. Again, if caught, the penalty faced by the company directors will be a fine of RM100,000 or 5 years imprisonment or both.

In summary, let’s take a look back on the advantages of creating a proper business exit planning

a)    The Business Exit plan and business owners guarantee the sale of the business interest at a fair value. It sale price is stated in the buy-sell agreement. At the same time it avoids the unqualified heirs from being part of the business or selling of the deceased’s shares to outsiders.

b)    When the Business Exit plan is put in place, it avoids any unnecessary argument or negotiation over the purchase price between the heirs and the surviving business owners. This is important even though the Memorandum of Association and Articles of Association (for private limited companies) provide pre-emptive rights to shareholders regarding the disposal of the shares by way of a sale. However, the pre-emptive rights do not mention to pre-agreed price that is fair to the parties. The heirs and surviving business owners would still need to agree on a price to sell the shares. The heirs and surviving business owners may disagree for on the proposed price and the deadlock can last a very long time. In the meantime, the surviving business owners would have to work with the heirs.

With a Business Exit Plan, this is avoided as the parties can longer have the right to discuss on the pricing. It has been agreed and stated in the agreement that binds the business owner, his heirs and estate of the business owner.

c)    With a power of attorney, it provides for a smooth transfer of outgoing business owner’s interest to the purchaser when the specified events occur. There is no need to wait for the personal representative to act or worse still when the outgoing business owner is disabled or in coma, to wait for his recovery to sign Form 32A.

d)    As the business or the company is a not a public listed company, there is no outside market to sell to. The existing business owners would be the natural purchasers. Thus, with a Business Exit plan, it ensures that non-liquid stock/interest is converted to liquid income, providing a fund for outgoing business owner or for his loved ones to use during their time of need.

e)    The Trustee ensures that the outgoing business owner’s interest are properly transferred to the surviving business owners and the sale proceeds are distributed proper without involving the surviving business owners and family members of the outgoing business owner. By implementing a trust, the business owner can ensure that the sale proceeds are not misspent by his beneficiaries.

f)     The business carries on like normal and the suppliers/creditors can be assured of the existence of the business. The key employees will be willing to remain within the business due to the smooth transfer of ownership to the remaining business owners.

In reality, when we discussed the exit planning with business owners, it is very common that they will try to find a way to “save cost”. However, as a professional, our duty is always to highlight the issue and suggest suitable options for business owners after evaluating their situation.

We’ve been discussing extensively for the past 5 issues in Malaysia SME articles, talking on exit planning when businesses consist of partnership among non-direct family member, which includes friends, siblings or relatives

Starting from next issue, our topics will switch to Family Owned Businesses and how to plan for the continuation of Family Business. Stay Tuned …

About the Author:

MalaysiaWills CEO Evanna Phoon

Evanna Phoon is CEO & Founder of www.MalaysiaWills.com, Malaysia’s first online will writing service provider for Rockwills Corporation Sdn Bhd & as-Salihin Trustee Bhd. Visit her website to download FREE ebooks & watch over 300+ videos on the topic of Will Writing for Personal & Business. She can be contacted via info@malaysiawills.com.