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Preliminary steps - Disability / Death

An important step to be taken into account in anticipation of a disability or death is the designation of an individual to exercise the rights of the disabled or deceased Representative and execute documents on his or her behalf. As a prolonged disability or death may critically affect the survival of a business, setting up a proper succession plan and having the right documents in place will facilitate the transition process and ultimately relieve the family, agent, executor and Alliance of an otherwise difficult burden.

Mandate Given in Anticipation of Incapacity

Since a disabled individual is unable to exercise his or her civil rights, an agent must be appointed to act on his or her behalf and administer his or her property. Such a designation may be done through a document commonly referred to as a mandate given in anticipation of incapacity. By appointing an agent to carry out his or her instructions in anticipation of disability, the Representative ensures that his or her family will not be left dealing with lengthy, complex and costly procedures to appoint such an agent. In the event of disability, the agent is the individual who will provide instructions regarding the transfer of client accounts.

Will

The first purpose of the will is to designate the beneficiaries who will receive the Representative's assets upon his or her death. In the absence of a will, the property will be distributed among the heirs according to the laws of the applicable jurisdiction. The will also allows the designation of an executor (also known as an administrator or a liquidator in Quebec) to settle the estate. In the event of death, the executor is the individual who will provide instructions regarding the transfer of client accounts. It is important to ensure that the will contains provisions similar to those included in the Buy/Sell Agreement.

Buy/Sell Agreement in the Event of Death or Disability

A written agreement setting out the details of the sale must be entered into between the parties. In order to help you ensure that no aspect of the contract is overlooked, a model agreement may be used as a reference. However, certain clauses may need to be adapted to reflect your specific situation (See Buy/Sell Agreement Model - Death or Disability). The agreement may take different forms; for example, it could state that the Acquiring Representative irrevocably commits to purchasing the book of business of the Selling Representative in the event of death or disability; or, it could include a right of first refusal which requires the agent/executor of the Selling Representative to first offer the book to the Acquiring Representative on predefined conditions prior to being able to sell it to another party.

Life Insurance

In order to be able to fund the purchase of the deceased Representative's book of business, it is recommended that the Acquiring Representative purchase life insurance with a benefit amount which is sufficient to cover the purchase price agreed upon. As financing through life insurance may be done in several ways, each with different legal and tax implications, it is important to choose the appropriate strategy and adapt the buy/sell agreement accordingly.

Compensation for the Loss of Clients

In anticipation of clients leaving Alliance for another firm upon the transfer of client accounts, it could be appropriate to include a price adjustment clause in the Buy/Sell Agreement. However, it is important to bear in mind that should a reduction in the purchase price be requested, the responsibility for applying such a clause would fall on the agent or executor of the Selling Representative.

Diligent Review

Upon the acquisition of a book of business, whether the acquisition consists of assets (clientele) or shares (company), it is important to conduct periodic reviews to ensure that the assets or shares purchased correspond to the requests of the Selling Representative and expectations of the Acquiring Representative. This process can be quite simple or more complex depending on the amount of assets under administration, type of assets, size of the book of business, type of clients.

Since the purchase of a book of business constitutes an important transaction which is likely to significantly impact your financial and professional future, it is recommended that you seek legal advice to ensure that your reviews are thorough and accurate. In any case, it is appropriate to ensure that the Selling Representative has a record in good standing with Alliance and regulatory, civil, criminal and tax authorities; that commissions declared are those paid by Alliance; that there is no mortgage, security or charge on the assets purchased, etc.

Legal Advice

The steps and documents below outline various legal aspects which will have a significant impact on the value of your assets to be transferred. You must know that since this is a private agreement to which Alliance is not a party (Alliance only acts according to instructions of the Acquiring Representative and those of the agent or executor of the Selling Representative), Alliance cannot judge the merits or the scope of the agreement entered into between the Acquiring and the Selling Representatives.

Therefore, the receipt or acceptance of the agreement by Alliance does not mean that Alliance is bound by any of its terms. More specifically, Alliance's policies and procedures, as well as any and all applicable laws and regulations, will always prevail over any agreement, namely in the event of inconsistency between provisions. It is strongly recommended to seek legal advice before entering into and executing any such agreement.

In addition, please note that the information contained herein is not intended to provide legal advice but should rather be seen as a guide to assist you in understanding certain basic elements and common situations. It is worth mentioning that Alliance's procedures at the time of the transfer will prevail over any information contained herein in the event of discrepancies.

Financing

In order to facilitate the purchase of a book of business by a Representative licensed with Alliance, assistance in finding a financing program is offered through the firm in the absence of such a program at the respective insurance company. 

Sending Documents to Alliance

Both Representatives involved in the transaction must complete an information document and submit it for approval to head office. A copy of the Buy/Sell Agreement must also be attached (See Information Document Related to a Private Agreement Between Representatives).

It is important to remember that even if the Selling Representative executes this document, his or her legal representative (agent or executor) must be mandated according to the procedure required under the circumstances and complete and execute the document again on behalf of the Representative. You should be aware of the fact that Alliance and its employees are prohibited from commenting on the legal aspects of the content of the agreement.

Location

Alliance Financial Group
200 Consumers Road, Suite 700, Toronto, ON M2J 4R4 Canada

Contact

Local: 416-490-1974
Toll Free: 1-877-490-1974

Office Hours

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