Continuity plans can come in a variety of forms.  The most comprehensive are those between shareholders or partners.  Depending on the formation of your business, there may be a variety of document types that make up your continuity plan.  For example, if your business is a corporation your plan may include your shareholders agreement. However, if you have a partnership, your plan may include your partnership agreement.  Either of the above could include a buy-sell agreement and one or several accompanying insurance policies.

Regardless of the form your continuity agreement takes, you must ensure that at a minimum you are taking these 8 questions into consideration:

1. What are the triggering events that will be covered by this agreement?  For instance, will it be just upon death and/or disability? Or should loss of license also be included?

2. What is your definition disability? Providing a solid definition for disability will ensure there is no ambiguity when this event is triggered.

3. How are you going to agree upon price?  There must be a specific valuation method identified in the agreement so there will be no disagreement on price.

4. What sort of payment terms will you be providing?  Do these terms take into account erosion of clients, taxation issues for the acquiring party?

5. Who will the buyer be?  Depending on the structure of your company there may be an order in which the buyer is identified.

6. How will the continuity plan be financed?  There’s a variety of ways this can be accomplished.  Most popular methods include life and disability insurance policies or your home office might be willing to provide financing to the acquiring party.  Whatever the method, be sure to directly tie the financing amount to the method of valuation used and agree upon the frequency with which the valuation and financing will be reviewed.

7. Have you authored a transition plan?  The continuity agreement, partner and financing are all required components for the transaction.  However, you need to ensure there is an orderly transition of day-to-day operations to the continuity partner as well.  Everything from the technology you use to the person who answers the phones.

8. When are you going to review the plan again?  Terms of a continuity plan can be affected by a variety of external factors.  Be sure to pencil in regular dates, at least annually, to review the plan on a regular basis.