Shareholder Protection
Our specialist advisers can offer expert guidance on
shareholder protection insurance.
If you have two or more shareholders and want
to financially protect your business then we can
help you explore all your options.
Shareholder Business Protection
Shareholder business protection insurance offers peace of mind to business owners, that should a fellow shareholder be diagnosed with a critical illness or pass away, there’s money available for surviving directors to buy the shares back from their estate.What is shareholder protection?
Companies that have multiple different unrelated directors often encounter issues if one director dies or can’t work due to a serious illness. Problems that can arise are:
- The family of the deceased/ unwell director may decide that they want to help operate the firm, but lack the industry experience to do so adequately.
- The family may wish to sell their stake in the company to a competitor to help cover day to day expenses, however your company may not have the means to buy the shares back.
- Your organisation may be struggling due to the loss of an important director and find the value of the business has diminished, or, other directors need to work longer hours to maintain the same output.
If a shareholder is absent and can’t return to work, or they unfortunately pass away, shareholder protection will provide a lump sum of money for the remaining directors to purchase their shares. The money raised from the policy will go to shareholder and the company will continue to trade, without having to find capital to buy-out a director.
This video below is a great example of how shareholder insurance can protect a business.
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Contact Information
Our regulated consultants are highly experienced at providing businesses with shareholder insurance advice, comprehensively explaining the positives and negatives, as well as covering the essential requirements (such as single and double option agreements).
To get started please complete our enquiry form and a qualified financial adviser will make contact to discuss how we can support you with a bespoke shareholder protection plan.
Frequently Asked Questions - Shareholder Protection
What is Shareholder Protection Insurance?
Shareholder Protection Insurance is a type of insurance policy that provides financial protection for the remaining shareholders of a company in the event of a key shareholder’s death or disability. It ensures that the deceased or disabled shareholder’s shareholding is not lost to the company or other shareholders.
Who needs Shareholder Protection Insurance?
Any company with multiple shareholders, particularly those with significant shares, can benefit from Shareholder Protection Insurance. It is especially important for companies where:
- Key shareholders are essential to the business
- The company has a significant amount of debt or assets
- The remaining shareholders are not financially secure
How does Shareholder Protection Insurance work?
When a shareholder purchases a policy, they pay premiums to the insurer. The policy pays out a lump sum to the remaining shareholders if the insured shareholder dies or becomes disabled. The payout is typically used to purchase the deceased or disabled shareholder’s shares from their estate, ensuring that the company remains under control of the remaining shareholders.
What are the benefits of Shareholder Protection Insurance?
The benefits of Shareholder Protection Insurance include:
- Ensuring business continuity and stability
- Protecting the company’s assets and reputation
- Preventing the loss of control and influence by other shareholders
- Providing financial security for the remaining shareholders
- Reducing potential disputes and conflicts between shareholders
What types of insurance policies are available for Shareholder Protection?
There are two main types of policies:
- Term Life Insurance: Provides coverage for a specified term (e.g., 10-20 years) and pays out a lump sum if the insured shareholder dies during that term.
- Whole Life Insurance: Provides lifelong coverage and pays out a lump sum if the insured shareholder dies at any time.
How do I choose the right insurance policy?
When selecting a policy, consider the following factors:
- The insured shareholder’s age and health
- The company’s financial situation and goals
- The desired level of coverage
- The premium cost and payment terms
- The policy’s conditions and exclusions
How do I ensure that the policy is properly set up and maintained?
To ensure the policy is properly set up and maintained it’s essential you consult a qualified business protection adviser with permissions to advise companies. We have advisers across the UK able to assist you.
Are there any tax implications to consider?
Yes, there may be tax implications to consider when purchasing a Shareholder Protection Insurance policy. It is recommended that you consult with a tax professional to understand the specific tax implications in your jurisdiction.