Comment: £1.1tn protection gap could have firms in mourning By ROLAND OLIVER Published on Sunday 3 June 2012 00:00 AS OF April this year there were more than 2.1 million registered companies in the UK and a staggering business protection gap defined by Legal & General as £1.1 trillion. Legal & General's research also found that 39 per cent of business owners expected business to fold within 18 months of the death or critical illness of a key person and a third of business owners have no shareholder protection in place. If you are involved in a business, small or large, you will know that an integral part of the running costs includes insurance in relation to buildings and contents, key equipment, stock, vehicles and public liability to name but a few. The cost of each is taken as a given and paid regularly to ensure a business is functioning within the right legal requirements and to provide backup should the "worst" happen. There is no doubt that equipment, vehicles, location and so on provide the means by which a business can offer goods or services but the real backbone of any firm is the people who make it successful and profitable. For all business owners, when it comes to protecting the business the key considerations are continuity and succession. On the temporary absence or loss of a key person, business owners need to consider for how long (if at all) the business could continue to run efficiently and remain profitable. In addition to this, they need to consider what plans are in place to ensure business assets are valued correctly and passed to the right people. There continues to be a staggering need for companies to address this issue but through a lack of knowledge of the risk or understanding of the solutions available, that it is not to dealt with. We've all heard at one time or other someone quote those famous words from Benjamin Franklin: "In this world nothing can be said to be certain, except death and taxes." Ask any business owner what concerns them when it comes to tax and they will most certainly respond that they want to ensure they maximise all available tax advantages and to have the correct accounting procedures in place to do so. Why then do so many companies remain resistant when it comes to having the correct plans and procedures in place to ensure death or serious illness does not affect the daily running of the business? According to the Actuarial Profession, which represents the members of the Institute and Faculty of Actuaries, the likelihood of a lone director, now aged 35, dying before the age of 65, is 7 per cent. But on a board of ten 35-year-olds, the likelihood of one dying before 65 increases to 51 per cent. On that same board, the likelihood of at least one partner/director having a critical illness before the age of 65 is 97 per cent. Are these percentages as you expected? Whether you are a limited company, sole trader, partnership or limited liability partnership, the threat of death or serious illness of a key person is very real and it doesn't have to mean the end of a business you have worked hard to create and make profitable. If you are considering continuity or succession planning we can help with calculating the level of cover required, how to set up the arrangement and the tax implications associated with the premiums and benefits payable on these plans. Roland Oliver is principle at Oliver Asset Management