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Right of first refusal : the cause of many evils

by

Hubert Roy

27 June 2017 07:00

Robert Bournival | Photo : Réjean Meloche

For Robert Bournival, if the damage insurance brokerage is currently discussing the abolition of the rule of 20 %, this is because brokers have agreed to sign a clause of first refusal from insurers.

For Mr. Bournival, this right of first refusal, which means that an insurer can prevent the sale of a brokerage firm in which he is a shareholder, is the cause of many ailments in the debate about the application ofIntact Insurance to abolish the rule of 20 %.

He pointed out that several owners of firms with links Intact is approaching retirement. However, the fact that they signed a right of first refusal prevents them from finding a buyer out of the bosom of Intact, potentially reducing the value of their firm.

However, it is a problem that should not have happen to be according to him. «As long as there are firms, to sell on the market, their value should hold. The right of first refusal changes the game in their case. «

He adds that in the case of firms that have an insurer shareholder at the rate of 20 %, sell this first part is easy. Establish the value of the remaining 80%, however, is a whole different pair of sleeves.

«What is its value, since Intact will be able to say no having regard to its right of first refusal ? Will there still be four times the commissions ? If he is going to see a different insurer, it renchérira simply. It does not solve the problem of establishing the true value of the firm, » said Mr. Bournival.

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