Shareholder Protection

Safeguard your business with Shareholder Protection

Protecting your business and its’ interests is paramount to ensuring success. If a shareholder or proprietor suffers a major illness or passes away it is important to have cover so the business can continue to fully operate. Shareholder Protection insurance is used to provide security should the worst happen.

This type of insurance policy can be put in place so that if a shareholder, or owner, falls ill or passes on there is a guaranteed lump sum set aside to purchase the shares and ensure the smooth running of the business or organisation. Without protection shares could be inherited by family members or other individuals outside the organisation, affecting company stability and profitability. This could mean that the daily running of the business is brought to a standstill whilst the situation is resolved.

Shareholder Protection not only makes it simple for remaining shareholders to acquire stakes in their own company but it can also provide for the family and dependants of the gravely ill or deceased stockholder.

If shares are automatically passed to a beneficiary in the event of a death, having Shareholder Protection in place ensures that a lump sum is readily available to purchase these thus giving the deceased’s family financial security in the bleakest of situations.

Shareholder Agreements

Purchasing Shareholder Protection does not automatically ensure that shares left by a deceased holder pass to the remaining shareholders.

To safeguard the company, and to guarantee that shares are bought by the current holders, a cross option agreement should be made between the parties.

With a legal agreement in place, no matter which shareholder passes away or becomes seriously ill, the remaining shareholders can be certain that they are able to purchase the stocks, at the current market value, without having an additional financial burden placed upon them.

A cross option agreement should be drawn up with a solicitor and with the full agreement of all current shareholders.

Shareholder Protection FAQ's

What is Shareholder Protection?

This is an insurance policy that is purchased by each shareholder of a business to ensure that the company or organisation can continue to function in the event of the passing or serious illness of a current shareholder.

The policy is designed to pay a lump sum to the remaining shareholders guaranteeing that they are able to acquire the shares needed to retain the majority holding of their company.

Who can purchase Shareholder Protection policies?

Each shareholder should purchase their own policy which will cover themselves against their own critical illness or death.

A legal agreement should be drawn up between all the shareholders to ensure the policy pay-out is used to purchase any shares left after a death or serious illness.

What about Partnership Protection?

Partnership Protection is used when a partnership company exists but does not release shares. Within a partnership shares are not issued so Shareholder Protection would not be valid.

In this case a different type of insurance called Partnership Protection should be considered.

This insurance policy guarantees that if a partner should pass away their half of the company is automatically signed over to the remaining partner.

However, if a company or organisation issue shares, then a Shareholder Protection policy would be the most beneficial insurance to buy.