Things tend to go wrong when they are least expected. And they often go wrong in clusters. The impacts on the business, the family, their security and their futures can be devastating.

Typically, these types of events occur for the following reasons:

• Death or sickness of the owner or a key person in the business
• A key customer or supplier becomes insolvent
• Litigation following faulty product, poor service or association with another party that are caught up in litigation
• Embesslement or fraud by a trusted partner or person.

The impacts of such events can be huge. Worse, they may not be restricted to the business or parts of the business. Poor structuring, protection or practices can see the impact cascade throughout the business, down through to the directors and ultimately to the owner’s home, assets and family.

These effects can be compounded where there is poor estate planning, where there is no equity agreement amongst shareholders or where there have been no structured estate management instructions left behind. Survivors have a battle to fight with their hands tied behind their backs.

The opportunity exists for many risks due to illness and death of the owner, partners and key persons to be spread by the use of insurance.  It is often on the to-do list of business owners.

Over years where are practice included an insolvency division showed us the importance of getting these basics of business structures right. The insolvency practitioners would pursue the recovery of assets wherever the trail led.

The irony is that modern corporate law was designed to allow an entrepreneur to invest a limited amount of money into a venture knowing that if it were to fail, then that was the limit of the funds that would be lost. However, the realities of modern business practice, the funding and security requirements of lenders and the changes to law for company directors over the years have limited the protections that were once available.

However, good planning can identify these types of risks and put actions in place to minimise the impact of all types of risk. Hopefully, long before things go wrong!