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Advance Retirement Planning & Director’s Provident Fund

During the critical growth phase of your business, ploughing profits back into it probably made sense. But that leaves you less headspace and resources to plan for your life after retirement. True, you’ll want what’s best for your business but equal emphasis should be placed on planning and sustaining the current lifestyle of you and your family – even enhancing it for the future.

This is where a Director’s Provident Fund (DPF) can help. It’s a retirement savings scheme specifically designed for directors or business owners. It serves as a long-term investment vehicle, allowing you to accumulate funds for your retirement. It guarantees your financial security and stability in your post-retirement years.

The benefits you stand to get by opening a DPF are:

Retirement savings
- Through regular contributions to the DPF, you can build a significant corpus over time to support your post-retirement lifestyle.

Wealth accumulation
- You can invest your DPF funds in various financial instruments such as stocks, bonds, mutual funds, or real estate, potentially generating additional returns and wealth appreciation.

Legacy planning
- DPFs provide a structured and designated asset that can be passed on to beneficiaries. In the event of your demise, your loved ones can gain access to the funds via hibah

Asset protection
- In case of financial difficulties or bankruptcy, your DPF funds may be shielded from being seized to settle business debts, providing a layer of asset protection.

Tax benefits
- DPF contributions are eligible for tax deductions under applicable tax laws. These deductions can reduce your taxable income, leading to potential savings.

Ready to start planning for your retirement?

Keyman Takaful

In a business, the key person is usually the owner, the founder, or perhaps a key employee or two. The main qualifying point – the person’s prolonged absence would cause grievous financial implications to the company.

Imagine what happens to your business if this key person were involved in an accident that cost them their life. It’d be hard for you to continue running the business as usual and delivering profits.

That’s why you should consider keyman takaful. You can purchase takaful coverage for identified key employees, pay the contributions, and become the beneficiary of the certificates. In the event of their death/disability/critical illness, you will receive the benefit.

The money can be used to cover the costs of recruiting, hiring, and training a replacement for the key person. And if you find that it’s not feasible to continue operations, you can use the money to pay off debts, distribute it to investors, provide severance benefits to employees, and close the business in an orderly manner. It’s a far better option than declaring immediate bankruptcy.

Here are the main benefits of having keyman takaful coverage:

Business continuity
- Ensures that your business can continue operations by providing a lump sum payment to cover immediate expenses or recruiting and training a replacement.

Financial protection
- In the event of the key person’s death/disability/critical illness, the policy pays out a predetermined sum assured to your business, helping to offset the financial losses incurred.

Recruitment and training
- Provides funds to cover recruitment costs, training expenses, and any other costs associated with finding and developing a replacement.

Loan repayment
- Repays outstanding loans or meets financial obligations, thus reducing the financial burden on your business.

Confidence for stakeholders
- Boosts stakeholders’ confidence (investors, lenders, and partners) as you have taken steps to mitigate the risks associated with the loss of a key employee. This can strengthen relationships and increase trust in the business.

Simply put, as a responsible and forward-thinking business owner, having keyman takaful should be part of your strategies.

Business Succession Planning

Business succession planning is crucial to protect and preserve the value of the business when a business owner dies. It allows for a smooth transition and transfer from the deceased business owner (or their family) to the other surviving business owners.

But the following challenges prove that business succession planning is not as clear-cut as you might think.

- New partnership with heirs
  - Following the death of a business owner, the heirs will inherit the business interest. Quite often, the heirs are unqualified, not interested, or inexperienced to work with the business partners.

- Costly business disruption
  - Disruption and negative implications can happen due to the heirs’ inexperience and lack of knowledge. They could demand things or chart a new plan without a good understanding of the business.

- No outside market for the shares
  - No ready market for private limited companies (Sdn Bhd) and partnerships. It’s difficult for the heirs and remaining business partners to agree on a price when you’re no longer around.

- Family faces financial difficulties
  - Heirs who don’t want to be involved would want to sell their business interest quickly. With no proper pre-arranged funding to buy out the heirs’ shares, they will suffer financially.

- No funding to buy out business owners
  - Even if the remaining business owners would want to buy out the heirs’ shares, they will have difficulty raising money if no funding is set aside for this.

New partnership with heirs
- Following the death of a business owner, the heirs will inherit the business interest. Quite often, the heirs are unqualified, not interested, or inexperienced to work with the business partners.

Costly business disruption
- Disruption and negative implications can happen due to the heirs’ inexperience and lack of knowledge. They could demand things or chart a new plan without a good understanding of the business.

No outside market for the shares
- No ready market for private limited companies (Sdn Bhd) and partnerships. It’s difficult for the heirs and remaining business partners to agree on a price when you’re no longer around.

Family faces financial difficulties
- Heirs who don’t want to be involved would want to sell their business interest quickly. With no proper pre-arranged funding to buy out the heirs’ shares, they will suffer financially.

No funding to buy out business owners
- Even if the remaining business owners would want to buy out the heirs’ shares, they will have difficulty raising money if no funding is set aside for this.

We can help you plan for a seamless, frictionless, and win-win business succession through these three key components:

- Shareholders’ agreement
  - Defines the mechanism for the transfer of the shares from the outgoing shareholder (deceased) to the surviving shareholders.

- Takaful as the funding vehicle
  - Each shareholder is to take a takaful policy in their own name where the proceeds are designated as hibah for the rest of the shareholders so they’ll have funding for the buy-out.

- Wasiat as the settlement process
  - Each shareholder is to write a wasiat, listing the company shares as one of their assets. Upon a shareholder’s death, the wasiat executor will enforce the terms of the shareholders’ agreement.

Shareholders’ agreement
- Defines the mechanism for the transfer of the shares from the outgoing shareholder (deceased) to the surviving shareholders.

Takaful as the funding vehicle
- Each shareholder is to take a takaful policy in their own name where the proceeds are designated as hibah for the rest of the shareholders so they’ll have funding for the buy-out.

Wasiat as the settlement process
- Each shareholder is to write a wasiat, listing the company shares as one of their assets. Upon a shareholder’s death, the wasiat executor will enforce the terms of the shareholders’ agreement.

This is just preliminary information for you to get a better idea about succession planning. Eager to find out more? Contact us today!

Through our business succession planning programme customized to your needs, you’ll stand to gain these benefits:

- Business continuity
  - Ensures that after your passing, your company remains stable and continues to function effectively, avoiding disruptions or uncertainties.

- Smooth transition of ownership
  - Helps avoid conflicts or disagreements between heirs and surviving business owners by establishing a clear process for transferring shares or ownership stakes, thus minimizing potential business disruptions.

- Talent retention and development
  - Effective succession planning involves identifying and developing key individuals who have the potential to assume leadership roles in the future. This motivates employees to remain committed to the long-term success of the business.

- Minimized tax and financial risks
  - By factoring in tax implications and wasiat stipulations, heirs and business owners can minimize tax burdens and financial risks associated with the transfer of ownership, preserving the value of the business for future generations.

- Preserved harmony and communication
  - By involving family members and business owners in the succession planning and decision-making process, the likelihood of conflicts or misunderstandings is reduced, promoting overall harmony and long-term business sustainability.

Business continuity
- Ensures that after your passing, your company remains stable and continues to function effectively, avoiding disruptions or uncertainties.

Smooth transition of ownership
- Helps avoid conflicts or disagreements between heirs and surviving business owners by establishing a clear process for transferring shares or ownership stakes, thus minimizing potential business disruptions.

Talent retention and development
- Effective succession planning involves identifying and developing key individuals who have the potential to assume leadership roles in the future. This motivates employees to remain committed to the long-term success of the business.

Minimized tax and financial risks
- By factoring in tax implications and wasiat stipulations, heirs and business owners can minimize tax burdens and financial risks associated with the transfer of ownership, preserving the value of the business for future generations.

Preserved harmony and communication
- By involving family members and business owners in the succession planning and decision-making process, the likelihood of conflicts or misunderstandings is reduced, promoting overall harmony and long-term business sustainability.

Group Takaful

Group takaful plans enable employers to provide benefits to their employees as part of their total compensation package, outside of government-provided benefit programmes. It’s a single certificate (Master Cert) covering a group of individuals – usually employees of the same company and their dependants.

It consists of three key components :

Coverage
- Provides financial assistance to your employees and their loved ones in the event of death/total permanent disability via lump sum payment based on mutual assistance.

Support
- Addresses your employees’ healthcare and safety needs through a range of protection benefits such as critical illness, hospital & surgical, as well as accidental benefits.

Rewards
- Lifestyle privileges extended to your employees.

The benefits of having group takaful plans for your employees are:

Comprehensive coverage
- Group takaful plans typically offer comprehensive coverage, including life insurance,
  medical coverage, and disability benefits. This way, your employees and their families are protected in the event of illness, injury, or death.
Cost-effective solution
- As the risk is spread across a larger pool of participants, the premiums for group
  takaful plans tend to be lower per individual. This makes it more affordable for you
  to provide coverage for your employees.
Employee attraction and retention
- Offering group takaful plans demonstrates your commitment to your employees’
  well-being and provides a sense of financial security. This, in turn, can enhance
  employee loyalty and job satisfaction.
Tax advantages
- Group takaful contributions may be tax-deductible for employers, thus reducing
  your tax liabilities. This makes it a tax-efficient option.
Customization and flexibility
- You’ll have the flexibility to choose the level of coverage, the type of benefits
  offered, and the contribution structure. This allows for customization that aligns
  with your business’ budget and your employees’ requirements.

As a responsible and compassionate business owner, you should insure your employees using group takaful plans.