Buy-and-sell agreements. Protecting your business interests.
Francois le Clus • July 1, 2024
Buy-and-sell agreements. Protecting your business interests.
If you’re running a business with partners, having a buy-and-sell agreement in place is crucial.
But why, you may ask? The answer is pretty straightforward.
Here’s the deal: When you pass away, your shares in the company become part of your estate or transfer to your business partner as per your shareholder’s agreement. If there’s no clear plan in place, those shares end up in your estate, to be distributed according to your will.
Enter the buy-and-sell agreement – your solution to these issues. This agreement is backed by life insurance policies on each partner’s life, ensuring enough cash to cover the purchase price. Simultaneously, the agreement establishes the obligation to sell the deceased partner’s shares and the obligation for the surviving partner to buy them.
Now, let’s talk about the risks:
- Insufficient cash: The remaining owners might not have enough cash to buy the deceased partner’s business interests.
- Uncertain fair price: Heirs might not be guaranteed a fair price for the business interests, potentially leading to a forced sale.
- Ownership complications: The remaining owners might face unclear ownership, dealing with heirs or delays in estate settlement.
- Business capital drain: Funding the purchase could drain the business’s capital, jeopardizing its continuity.
On the flip side, the benefits are significant:
- Business continuity: The business keeps going without outside interference.
- Smooth transition: Funds are available for a timely conclusion of the transaction.
For dependents or beneficiaries, the advantages are:
- Inherited capital: They receive a capital amount instead of dealing with a business they may not know.
- Financial security: The received capital can replace lost income and contribute to overall estate planning.
Now, let’s consider the importance of a shareholder’s agreement:
This agreement, entered into during the partners’ lifetimes, governs their relationship and outlines what happens to shares in the event of death or retirement. Without it, shares become part of the deceased partner’s estate.
And remember, getting the structure right is essential to qualifying for estate duty exemption. The Estate Duty Act provides exemptions if specific conditions are met.
In conclusion, a buy-and-sell agreement is vital for protecting interests and ensuring the intended transaction occurs. Without it, disputes can end in costly and time-consuming court battles, benefiting no one, especially not the deceased owner’s beneficiaries.
Medicine is built on precision, protocols, and evidence-based decisions. Financial life, unfortunately, is not. For many doctors, success arrives early in one area of life and much later in others—time, structure, and strategic planning often lag behind income. Over the years, a few patterns come up repeatedly when working with medical professionals. These are not mistakes born from ignorance or carelessness, but rather from being busy, successful, and focused on patients first. Here are five of the most common financial missteps doctors make—and why addressing them early can materially change long-term outcomes. 1. Being “Cash Heavy” Feels Safe… Until It Isn’t Holding large cash balances is often seen as prudent. Cash is liquid, familiar, and low-stress. For doctors with volatile workloads or private practices, this feels especially comforting. The problem? Cash is one of the most tax-inefficient assets for high earners. While interest income enjoys a modest annual exemption, anything above that threshold is taxed at your marginal rate. For many doctors, this means a significant portion of “safe” interest returns never actually reach them. Add inflation into the mix, and the real (after-tax, after-inflation) return on excess cash can quietly turn negative. Cash has a role—but without intention and limits, it often becomes a silent drag on long-term wealth. 2. Paying More Tax Than Necessary (Without Realising It) Doctors are among the most heavily taxed professionals in South Africa, yet tax planning is often treated as a once-a-year exercise rather than an integrated strategy. The issue isn’t usually under-reporting—it’s under-structuring. Different investment vehicles are taxed in very different ways. Income tax, capital gains tax, and dividend tax don’t just affect returns; they compound over time. Two portfolios with the same gross return can end up worlds apart after tax if they’re structured differently. When investment decisions are made in isolation—without considering tax, time horizon, and estate implications—the cost isn’t obvious in year one. It shows up quietly over decades. 3. Offshore Exposure: Opportunity or Overreaction? Global diversification is important. Offshore exposure can reduce concentration risk and unlock opportunities unavailable locally. However, many investors move money offshore without a clear strategy—often driven by headlines, fear, or currency anxiety rather than long-term planning. Key questions are frequently overlooked: How much offshore exposure is appropriate for your situation? Which structures are most efficient? How does this affect tax, liquidity, and future repatriation? Offshore investing isn’t a binary decision. The value lies in how, where, and through what structure exposure is obtained—not simply in moving money abroad. 4. Paying Everyone Else First Doctors are natural caregivers. Practices, staff, patients, families—everyone’s needs come first. Personal savings often come last. The data is clear: South Africa’s domestic savings rate remains worryingly low. Even among high earners, inconsistent or delayed personal investing is common. The risk isn’t lifestyle inflation—it’s time. Missed early contributions can’t be recovered later, no matter how high income becomes. Compounding rewards consistency, not intention. Paying yourself first isn’t about sacrifice; it’s about ensuring today’s success translates into future independence. 5. Using the Wrong Investment Structures This is arguably the most expensive mistake—and the least visible. Many doctors accumulate investments across multiple platforms, policies, and accounts over time. Each decision may have made sense in isolation, but together they can create inefficiencies around: Tax Access Estate planning Intergenerational transfer The structure holding the investment often matters as much as the investment itself. Over a 20- or 30-year horizon, the difference between “adequate” and “optimal” structuring can be substantial—even if the underlying returns are identical. The Common Thread None of these mistakes stem from poor decision-making. They stem from complexity, time pressure, and the reality that financial planning is a discipline of integration—not isolated choices. Income, tax, investments, offshore exposure, and estate planning don’t operate independently. When aligned, they reinforce one another. When they’re not, value leaks out quietly year after year. For professionals who spend their lives mastering complexity in one field, the challenge is recognising that financial clarity often requires the same level of specialised thinking. Because in finance—just like in medicine—the biggest risks are rarely the obvious ones. Ruvan J Grobler RFP™ (PGDip Financial Planning)
I recently signed up for one of my bucket list items, the demanding Comrades Marathon. It’s something that I always had in the back of my mind, and I said to myself that if I ever where to take on the 87km beast, I am going to be prepared. So, as I successfully entered and received my number, I immediately did 2 things: 1) I got a coach: Someone who is experience and can guide me week by week, month by month leading up to the Ultra Marathon 2) I got a training partner : After using all my persuasion skills, I convinced a friend to join me on this journey. Not only for the comradery, but more as an accountability partner, to make sure I show up for training even though I might not feel like it For many of us, we want to make sure 2026 is our best year yet, not just physically, but financially as well. How can we be more productive and make more money or at least manage it better? In his Book Atomic Habit, James clear writes about the ‘Commitment device’ in chapter 14. A Commitment device, also referred to as the ‘ Ulysses pact’ is a choice you make in the present, that controls your actions in the future. It is a way to lock in future behaviour, bind you to good habits and restrict you from the bad ones. Some examples include: - Eating out of smaller plates – to limit calorie intake. - Unsubscribe to emails and apps – to waste less time - Setting up an outlet timer, to cut off the Wi-Fi at 9pm per night - to limit social media or series binging. - Keep your phone in another room when working – to avoid distractions When it comes to your finances here are a couple of things you can try to make 2026 you most financially rewarding year yet. - Automate your investments: Remove the temptation to spend your money by setting up debit order for the money to be invested as soon as it hits your bank account - Appoint a financial partner – this can be an advisor, friend or spouse: his person must be strict and diligent and keep you to your goals. Schedule quarterly calls to go through your investment accounts to see how much it has grown - Buy groceries only twice a week: We almost always buy things we don’t need – limit your number of visits to the store - Let you partner hide your credit card during the week and have an x amount of cash available. This might sound harsh but can be extremely effective as we swipe or tab often without thinking. There’s so many examples of how we can adjust our behaviour by setting up ‘ Commitment devices. I’d like to hear your favourites so please send them through to geo@bovest.co.za and let’s help each other to make 2026 memorable and profitable. Geo Botha CFP® Marketing Director
