The loss of a key shareholder could mean the other shareholders lose control of the business.
Share Protection allows the remaining partners, shareholding directors or members to remain in control of the business following the death of a business owner.
As a shareholder your focus is on working with your fellow shareholders to make your business successful.
If you were to die, would your beneficiaries share the same goals for the business? Your fellow shareholders may have to work with partners who have little or no interest in the business and your beneficiaries will own shares with no ready buyers.
Why Is It Important?
Without appropriate provisions and available funds, the loss of a key shareholder could mean the other shareholders lose control of the business. Additionally, a deceased shareholder’s dependants could end up with an unwanted shareholding which could prove difficult to dispose of.
The aim of shareholder protection insurance should be to ensure that in the event of the death or critical illness of a shareholding director:
– funds are available to purchase some or all of the shares from the shareholder or their estate so that the other shareholders can retain control of their business
– the outgoing shareholder or their estate are able to sell their shares in the business for a fair value and
– the arrangement is set up in the most tax efficient manner.
This provides business continuity to the ongoing owners of the business and financial security to the critically ill owner, or the deceased owner’s beneficiaries.
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