Shareholders & partnership protection
Employees are a company’s greatest asset. They are your competitive advantage and without them your company could be at serious risk.
Protect your business against the loss of a shareholder
Like most financially responsible people you’ve probably written a personal will. No doubt you did this to make sure that your estate goes to your chosen beneficiaries in the event of your death.
But what about your business? What would happen if you, or one of your co-shareholders, died or had to retire through ill heath?
Have you established a process that will ensure that the business shares could be bought by the remaining shareholders for a fair price?
If a business loses a key shareholding director, it’s fair to assume that it’s unlikely to have adequate cash flow to be able to buy those shares. Borrowing funds from the bank is one solution, but that might not be straightforward or quick.
Being unable to buy these shares or having no agreement in place to manage this situation, could lead to expensive legal action, loss of control of the business and financial difficulties for the dependants.
Stay in control of your business. Losing a business partner would be bad enough. But without the funds to buy their shares, you could find someone else in the driving seat.
Boardroom confusion can lead to conflict in decision making as the surviving owners and the deceased’s family may have very different ideas about the future of the business. Other potential problems include:
- new business owners could take control of the day-to-day running of the business.
- the new business owner could be a competitor or completely unsuitable for the business.
- the deceased owner’s family are willing to share the shares but the surviving owners could have trouble raising the finances.
The cover we recommend depends on ther business set-up:
- Share protection is for limited companies
- Partnership protection is for partnerships and limited liability partnerships.
Each shareholder or partner takes out a plan on their own life which is written in trust for the other business owners. Each shareholder or partner signs a cross option agreement, giving the surviving business owners the option to buy the deceased owners shareholding and the estate option to sell them.
This process helps ensure business continuity (the business carries on trading with minimal disruption). The remaining partners use the money paid under the claim to buy the shares from, usually, the family of the deceased and the business continues.
A company share purchase is paid by the company and is usually free of Corporation Tax. Premiums will not be subject to Income Tax or National Insurance for shareholders.
The unexpected can happen and the impact on your business could be damaging and permanent.
As well as ensuring the stability and longevity of the business these policies also offer the peace of mind that fellow stakeholders and family members will be looked after should the worst happen.