Scarinci Hollenbeck, LLC
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201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: May 26, 2020
The Firm
201-896-4100 info@sh-law.comMany financial institutions, broker-dealers and registered investment advisers follow industry best practices and regulatory guidance to include succession planning and a written succession plan as an integral component of the entity’s Business Continuity Plan (“BCP”) or Disaster Recovery Plan (“DRP”). Past natural disasters and unexpected emergencies have savagely elevated the consequences of such events to federal, state and local governments, and both non-profit and for-profit businesses, charitable organizations, as well as closely-held family enterprises, law and accounting firms.
Succession plans have been considered a critical aspect of effective corporate governance. However, many firms and companies, particularly small businesses, don’t have a well-defined, written action plan to follow when planned and unplanned changes in leadership occur.
What will happen if your CEO or other key members of your firm’s C-suite management team contract coronavirus (“COVID-19”) and can no longer participate in the management and supervision of the company? Unfortunately, the ongoing pandemic has shown that no one is immune, including CEOs, top corporate officers, individual members of the Board of Directors or their trusted advisers/consultants or key parties of vendors/service providers. This pandemic illustrates how quickly disease can spread and over long periods of time where asymptomatic individuals are virus spreaders. ‘Business’ life, until now, has been a uniquely directly interpersonal “social” one involving personal contact, meetings, travel, and varied measures of socialization in both small and large groups in myriad environments. It’s imperative to have a Succession Plan in place to address the temporary (or even permanent) loss of key members of your company’s management team or others that are relied upon for key functions and advice.
There is no magical “one size fits all” succession plan. Nor is there an immutable founder/CEO. Rather, each firm’s plan must be tailored to the entity’s particular management structure and specific requirements of the organization operating in its industry and sector. There are several general considerations that can enable the succession planning to create a plan that is effective during a crisis.
A well-developed succession plan ensures continuity in the management and operations of the company should a key player (or multiple high-level officers/managers) no longer be able to perform his/her or their duties. The Plan is also integral to maintaining the confidence of investors, business partners, lenders/creditors, clients, and staff.
As the COVID-19 crisis highlights, it is difficult to predict when and how a succession plan may be required. However, a plan is mandatory and immediate attention should be paid to its current conditions. To protect your business, it is essential to have a comprehensive plan in place before you need it.
If you have any questions or if you would like to discuss the matter further, please contact me, Paul Lieberman, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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