Liability insurance is an insurance product that provides protection against claims resulting from injuries and damage to other people or property. Liability insurance policies cover any legal costs and payouts an insured party is responsible for if they are found legally liable. Intentional damage and contractual liabilities are generally not covered in liability insurance policies.
Unlike other types of insurance, liability insurance policies pay third parties, and not policyholders.
I retired from full time employment just over a year ago. I made up my mind to retire long before that though, so the last few years, I spent time to think about how best to hand over the work I used to do, managing and representing an international organization. This is quite a challenging question as it seems rather normal for humans to hang on to a position of power as long as possible and not spend time and energy to prepare for an effective exit. Looking for answers I stumbled upon an article by Andrew Blackman and below I quote his suggestions as to what to consider when planning for an exit:
“You’ll find plenty of advice on building a successful business, but people don’t talk so much about how to leave it behind. And yet there are many good reasons for wanting to exit a business. Maybe you’ve found a better opportunity elsewhere and want to start a new venture. Maybe you want to retire or scale back. Maybe your business has just run its course, and you don’t have the passion for it anymore. Maybe you need to raise cash quickly, and selling your business is the only way. Even if you don’t plan to leave any time soon, it’s worth thinking through your exit options and having a strategy in place. Each one has its own particular advantages and disadvantages:
1. Pass It On
The natural transition for many family businesses is simply to pass ownership on to the next generation. In reality, however, it’s often not quite so simple. Here are some things to be aware of.
Advantages
When you pass your business on to a family member, the main advantage is continuity. No outsiders need to be involved: you can pass on your business to someone you trust, and see it stay in the family for another generation. It’s also a great way to provide for your children’s future, if running the family business is something that interests them.
Also, it can be relatively simple to complete the transition if everyone is in agreement. You don’t have to go in search of external buyers, negotiate a sale, and endure a complex due diligence process. It can be a smooth transition with minimal impact on the running of the business.
Disadvantages
Unfortunately, not all transitions to the next generation go so smoothly. Sometimes your son or daughter may have different ideas about how to run the business, or there can be conflict between siblings over who has control.
In extreme cases, families can be torn apart by disputes over the direction of the business. Also consider the tax implications. If you transfer ownership of the company either for no payment or for less than its market value, the tax authorities may view it as a gift and charge gift tax.
Tips for Success
Know your family, and make a decision, based on what’s right for the business. Management consultants Ernst & Young recommend taking on external advisors to get a more objective view, as well as creating a formal succession plan to ensure that expectations are set clearly on all sides.
Also ensure that you’ve passed on all the necessary skills and training to your successor and consider creating a “roundtable” or family board to ensure that major decisions are made fairly, with involvement of all family members, and that any potential conflict is quickly defused.
2. Management or Employee Buyout
If passing your business on to a family member is not an option, consider another “friendly buyer” like your existing managers or a group of employees. They can pool their funds and buy the business from you.
Advantages
A management or employee buyout is also great for continuity. These are people who know exactly how your business is run and have the skills to continue running it successfully. They may pursue a slightly different strategy, but it’s still likely to be a smooth transition. It’s also satisfying: business owners often worry about what will happen to their long-term employees when they leave, and what better way to know they’re well taken care of than for them to be the new owners?
Disadvantages
For your employees to buy you out, they must get the money together first. This can be a problem, especially with larger, high-value businesses. In some cases, the group of managers or employees will need to take out a large loan to fund the purchase, which can be difficult to arrange.
One solution is for them to pay you gradually over time out of the company’s profits, but this is an obvious disadvantage for you as a seller, both because there’s a delay in receiving the money, and because there’s a risk that the company will struggle, and they won’t be able to pay you the full amount.
Tips for Success
As with option one, the main danger here is in letting personal relationships cloud your judgment. Negotiating a price can be difficult with people you know well, and you may end up leaving money on the table. So, try to keep things strictly business, and bring in outsiders to value the business and draw up a fair agreement. When the deal is completed, resist the urge to stay involved, unless you’re asked to of course. Generally, it’s better to step away and let the new owners run things in their own way.
3. Trade Sale
This option involves selling to another company—perhaps one of your competitors, or a larger firm looking to acquire a subsidiary in your industry.
To be continued next week
Ton Haverkort
ton.haverkort@gmail.com
The 69th UN Commission on the Status of Women (UNCSW) convenes in New York from March 10 to 21, 2025. This annual gathering of governments at the UN reviews progress made on the Beijing Declaration and other relevant commitments aimed at advancing gender equality and empowering women globally. This year’s event marks the 30th anniversary of the landmark Beijing Declaration for Action. However, the 69th UNCSW is overshadowed by recent significant budget reductions in official development assistance from the US government and various European nations against a backdrop of pressing challenges we face today, including poverty, gender inequality, universal healthcare, universal education, and support for humanitarian needs arising from natural and man-made disasters. What is even more concerning is that these decisions are abrupt, leaving no time to prepare for the reduced assistance for essential humanitarian and development needs. Adolescent and youth sexual reproductive health and rights, along with investment in gender equality, are at risk. According to the World Economic Forum report, at the current pace, it will take 134 years to achieve gender equality. With the funding cuts in place, the progress we have made in reducing poverty, improving access to youth-friendly health services, and combating HIV/AIDS is likely to reverse unless alternative mechanisms are introduced to finance development. The SDGs are, by and large, far from their targets, even though we have only five years remaining. Developing countries, UN institutions, academics engaged in research and development, and local and international civil society organizations are all significantly affected.
Middle and low-income countries receiving ODA will now be heavily affected. Funding cuts mean fewer women will have access to family planning, leading to increased maternal mortality, a key priority that the SDGs aim to reduce significantly. Additionally, women will have fewer choices of modern contraceptives, which hampers their human rights, the essence of multilateralism.
Governments in the global south need to call for urgent action on this devastating trend, which is being witnessed in Europe and the US. Here are some of the key issues that require attention.
Debt distress
Sources from the IMF, World Bank, and African Development Bank indicate that most developing countries are significantly hindered by debt distress. Many heavily indebted nations allocate 20-30% of their annual budgets to service their debt. The debt-to-GDP ratio in some Sub-Saharan African countries is notably high, with Zambia and Mozambique exceeding 100%, Angola at 90%, Ghana at 80%, and Kenya at 70%. Ethiopia, Democratic Republic of Congo, and Chad are 50-60%. In 2022, Ghana sought assistance from the IMF to address its debt crisis. Zambia defaulted on its debt in 2020 and is currently undergoing debt restructuring. In 2021, Ethiopia sought debt relief under the G20 Common Framework.
Some countries, like Pakistan, allocate 50% of their GDP to debt interest payments. This, in turn, places pressure on public finances and restricts spending on essential services such as health, education, and infrastructure. Achieving the SDGs-targeted plans will be at risk.
Therefore, a mechanism must be established to revisit the previously successful Heavily Indebted Poor Countries (HIPC) initiative and the recently launched Debt Service Suspension Initiative (DSSI), introduced in 2020, which aimed to assist countries in addressing the economic impacts of COVID-19 by suspending debt service payments. Additionally, robust mechanisms need to be implemented.
Revisiting International Accords
Official development assistance is crucial for promoting development and alleviating poverty worldwide by providing essential resources to low- and middle-income countries. Many of these resources are geared towards sub-Saharan African nations. Organizations such as the Organization for Economic Cooperation and Development (OECD) are responsible for establishing standards for ODA, including definitions, reporting, and monitoring. The Paris Declaration on Aid Effectiveness (2005) outlines key principles of ODA, including ensuring country ownership, aligning with national development priorities, harmonizing efforts to minimize duplication, focusing on results, and promoting mutual accountability, among others. The commitments made at the G7 and G20 groups over the years need to be revisited considering current developments, with industrial countries providing ODA facing a reduction in aid and selecting sectors in which they would prefer to invest. How will this align with a previous agreement to align their support with country priorities?
The global south needs to take a firm stand on this, particularly in owning their development and setting priorities based on the realities of their countries. Donor countries must be encouraged to respect this, as it was previously introduced in a rigorous process, allowing them to avoid reinventing the wheel.
Long Term Prospects
The countries of the Global South, particularly those in Sub-Saharan Africa, need to begin discussing new approaches to development and prepare for rapid progress. We are in an era that requires unlearning and relearning to ensure that the hard-won development gains of recent decades do not regress. At the African Union level and within the Regional Economic Communities, effective strategies are in place, including the newly introduced promising African Continental Free Trade Area (AfCFTA). If implemented as planned, with the renewed commitment of member states at the African Union level, it has the potential to transform the economies of countries by creating access to large markets in the region and providing incentives for investors to engage in various sectors, benefiting from economies of scale through large-scale production. Coupled with the growing population in the African region and its median age of 19, it will undoubtedly become the world’s next manufacturing, fashion, and entertainment hub.
The newly appointed AU chairperson and the respective commissioners have these key responsibilities on their shoulders.
Ephrem Berhanu is an economist, currently serving as the Managing Director of TaYA in Ethiopia. You can reach the writer via email at ephrember@gmail.com.
In many countries, governments rely heavily on taxation as a primary source of revenue to fund public services and infrastructure. However, there is a delicate balance between taxation and economic growth. Excessive taxation and restrictive regulatory environments can stifle business development, leading to reduced investments, layoffs, and ultimately, lower tax revenues. This paradox, where governments seek to increase revenue by imposing high taxes but simultaneously hinder the very businesses that generate taxable income, is a challenge that policymakers must address with care.
Taxation is an essential component of any economy, but excessive taxation can have detrimental effects on businesses. High corporate taxes, complicated compliance requirements, and burdensome regulatory frameworks can make it difficult for businesses to operate efficiently. Some of the negative effects include:
High taxes discourage both local and foreign investors from injecting capital into the economy. When businesses anticipate lower profits due to high taxation, they may relocate to countries with more favorable tax policies.
Small and medium-sized enterprises (SMEs) are particularly vulnerable to high taxes. Many SMEs operate on thin profit margins, and excessive tax burdens can push them out of business, leading to job losses and economic stagnation.
When businesses perceive taxes as excessive or unfair, they may seek ways to avoid them, either by shifting operations to the informal sector or engaging in outright tax evasion. This not only reduces government revenue but also creates an uneven playing field for compliant businesses.
Governments face a difficult challenge. They need tax revenue to fund essential services such as education, healthcare, and infrastructure, but they must also create a conducive environment for businesses to thrive. Striking this balance requires a strategic approach to taxation.
Instead of imposing blanket high taxes, governments can implement progressive tax systems that ensure that larger, more profitable businesses contribute proportionally while providing tax relief or incentives to SMEs. Bureaucratic red tape can be as harmful as high tax rates. Simplifying tax codes and making compliance easier for businesses can enhance tax collection without suffocating businesses.
Instead of focusing on higher tax rates, governments should foster business growth, leading to a larger taxable base. Economic policies that encourage entrepreneurship, innovation, and job creation can ultimately lead to higher tax revenues without overburdening individual businesses.
Several countries provide clear examples of how over-taxation has hindered economic growth. France’s High Tax Burden: France has historically imposed high taxes on businesses, leading to capital flight and reduced investment. Many companies have relocated headquarters to tax-friendly nations, causing the government to reconsider its tax policies.
Singapore’s Business-Friendly Model: Singapore, on the other hand, has one of the most competitive tax regimes in the world. By keeping corporate taxes low and providing incentives for business growth, Singapore has successfully attracted multinational corporations and sustained economic growth while maintaining healthy tax revenue streams.
To conclude, taxation is necessary for economic and social development, but excessive taxation can be counterproductive. Governments must avoid policies that kill businesses while attempting to increase revenue. A balanced approach, where taxation is fair, compliance is simple, and economic growth is encouraged, can ensure a sustainable tax system that benefits both the government and businesses. By fostering an environment where businesses can thrive, governments can ultimately collect more tax revenue without stifling economic progress.
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