The following true story
may just affect you!Ignore it at your peril!The names have been changed
for the sake of confidentiality but the facts are accurate!
Jane is a young mother of
three delightful children. She has been happily married to a successful man for
Try to picture the scene.
Just two weeks earlier her husband John (a keep fit enthusiast) suffered a
massive heart attack one evening while out of the house, exercising as usual.
Imagine the shock! In one
moment her comfortable, happy life has flown out of the window!
John was the go-getter in a
three handed Practice with his friends
from University days, Colin & Clive.
His two friends were
content to sit back and just work in the Business, leaving John to go the extra
mile as the pro-active leader building up an expanding successful firm.
Clearly it was John’s extra
efforts that had produced such a valuable commercial force in their community.
Two weeks had passed but
not the bereft empty feelings of bereavement, shock and uncertainty when Colin
& Clive – came to visit Jane.
After conveying their
condolences, they then cruelly told Jane that they had absorbed John’s share of
the Practice and that they would be
retaining the proceeds of the Practice
life insurance policy on John’s life!!!
No words can adequately
describe Jane’s feelings at that moment!
Jane was then referred to
us for legal advice by the family Accountant.
We delved into the facts of
1. It was correct that were valuable life assurance
policies, which sensibly had been increased by the Practice Independent Financial Adviser (IFA)
from time to time as the value of the
Practice and in particular John’s share in the Practice grew.
2. The life policies had been set up in trust, whereby the
policies declared that while John was the life assured, the policy proceeds
would be paid to Colin and to Clive.
3. As is usual, the wording of the Policies made no mention
that the proceeds should be held by Colin and Clive to pay out John’s widow for
his share in the Business.
4. Correctly the IFA had put in place similar arrangements
on the lives of Colin & Clive.
5. Tragically for Jane, despite constant reminders from the
IFA, no written agreements were ever put in place to provide that each such
life policy should be used as a fund to pay out the widow for her late
husband’s share in the Business.
What could be done for
Jane? If Colin & Clive were right then Jane stood to lose over £600,000!!
This case had a successful
conclusion, more due to bluster and moral pressure being brought to bear upon
Colin & Clive, than legal argument. It did take 8 months of anguish for
Jane for the problem to be resolved. That hardly helped her need for closure!
If Colin & Clive had
retained their original position, any court proceedings brought by Jane (or
John’s estate) would have been risky, much slower and expensive.
The legal arguments as to
what else the policies had been set up for, was not compelling.
Message to all Joint Dental
The strong, clear message
to all Joint Dental Practice Owners is “If you don’t already have in place
binding, legal agreements, then don’t delay”. Do not leave your loved ones
Whether you trade as a
Partnership, Limited Company, Expense Sharers or Joint Venturers, you need an
agreement which will cover much more than just provisions that come into play
Your agreement should at
least, cover the following items:-
is the agreement to last for a fixed
period of time or until one party pulls out?
what will be the percentage ownerships
between the parties and how these can be changed;
who shall have a mandate at the bank and
are there limited amounts to be withdrawn just on one owner’s authority;
the basis for preparation of the Practice Accounts;
areas of responsibility between the
who owns any patent rights or other
intellectual property rights;
in what circumstances can a joint owner
leave the business;
if a joint owner needs to be expelled,
on what basis does the right of the others become available as a remedy;
what happens if a joint owner becomes
incapacitated, or just absents himself from the Business;
arrangements on death (see above);
where a party leaves or dies on what
basis does a joint owner’s share in the
Practice stand to be valued;
if a joint owner leaves what
restrictions need to be imposed on him not to compete with the Business;
a mechanism for resolution of disputes
without recourse to the Courts.
There will be other items
to be included depending on the particular arrangements in your specific case.
Act now, since to leave it
for a later date tends to mean you will never sort out an agreement.
We have considerable experience
in preparing these documents. We use standard clauses wherever we can to speed
up the process and to make it more cost effective.
While a ‘face to face’
meeting is preferable, sometimes a pre-arranged telephone ‘meeting’ can be set
Once we outline what is required, we will establish a
fee basis in discussion with you, which will then be covered by our providing
you with a written Terms of Engagement Letter.
To make initial contact
please email Edwin Ross at firstname.lastname@example.org or just telephone on 0161 720