People becoming ill, a falling stock market, borders being closed, businesses being shut or operating on a lower capacity, business valuations declining, lower liquidity…. This is real, and it’s raw. What can you do to take care of yourself, your loved ones, and your business, right now? These are the questions that our clients are asking us every single day. So today, we bring you the honest answers that we give our clients: Plan ahead. Stay positive, but take practical and defensive action in a calm and measured way… and look for the opportunities.
If you are unable to travel and operate your business, or in the event of illness, or if you have aging parents (those most vulnerable to health risks) it is important that you have a plan that encompasses the following:
1. Can your personal and financial affairs be taken care of, both where you live, and overseas?
Being able to act and manage your affairs in a cross-border context is crucial. Ensure that you have valid Powers of Attorney in each country in which you hold assets or conduct business – this is crucial for protecting your family and your business and enabling access to assets and liquidity, especially if you are unable to act personally.
If you have aging parents, ensure that they too have valid Powers of Attorney so that their personal and financial affairs can be managed appropriately (see our blog International estate planning: Incapacity in a cross-border context – who would manage your interests in two (or more) countries?).
2. Do you have a valid Will? Does it align with your wishes and current circumstances?
Does it cover assets in other jurisdictions? Have you updated it for significant life events such as marriage, children, divorce, relocation? Have you nominated Guardians for your minor children? Would your family have access to cash if you pass away? Protect your family and your wealth. by ensuring that you have a valid Will that is appropriate for your circumstances. If you have aging parents, ensure that they too have valid Wills. Protect your inheritance.
3. Are you insured?
Do you have adequate life insurance for your family? Do you have sufficient “key man” business insurance to enable your business to continue in the short term without you? Do you have income protection insurance to cover you if you are unable to work for 3 months or more? Ensure that you do.
4. Do you have sufficient liquidity?
What are your personal and business cash reserves? How long will they last you for? How, and where, can you free up cash? A financial review of your business and personal assets can help you to reduce your discretionary expenses and ascertain the real-time solutions that are advantageous, both to your team and business. Maximise your liquidity.
5. Are your assets protected?
How are your assets held – personally, in a trust or a company? Where are your assets held? Do you plan to receive funds from family members who are residents of a jurisdiction that places regulatory restrictions on funds being transferred as gifts, or by will or inheritance? How is your business, and you personally, exposed to potential claims from creditors? Have you provided guarantees, security, cross-collateral? What can you do to limit your exposure? In uncertain times, this is crucial – it can mean the difference between bankruptcy or the survival of your business and the protection of your wealth.
6. How do you fund a cross-border business?
Are there any outstanding payments due to your business that you can capitalize with debt or equity? Are you contributing to the capital of a new entity or funding an exisiting business by venturing shares wholly or partially? Are you or your entity’s required to satisfy certain regulatory conditions or restrict offshore funding to overseas businesses under the laws of your “home” jurisdiction? Ensure that your risks are managed.
7. Should you restructure your business?
Yes. In an uncertain economy, if you are adjusting your business operations or restructuring either your supply chain or relocating your business to a different jurisdiction, it can impact your operational and tax costs. A business’ valuation can plummet in an economic slowdown. For a seller, this provides the perfect timing for proceeding with a restructure that could otherwise have triggered a substantially larger capital gain. For a buyer, this provides an opportunity to purchase a solid and otherwise well performing business at a substantially discounted rate. Look for opportunities.