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Business insurance cover available for company shareholders
If your fellow company shareholder or co-director died or became critically ill how would you feel if your deceased partners spouse, or one of their children, took over their share of the business, or worse still, sold it to a competitor? How would this affect your ability to run the company in profitable way?
Shareholder protection insurance or partnership protection insurance protects each of the shareholders, paying out a lump sum equivalent to the value of their stake in the business, in the event of either death or earlier critical illness. This lump sum allows the remaining shareholders to purchase the shares from the deceased shareholders family to retain control of the company.
"There are significant taxation implications to consider when arranging these types of shareholder protection plans and for that reason, it is important to take appropriate professional advice when considering shareholder protection."
By way of an appropriate business trust and option agreements (a Company Will, in effect) both the deceased shareholders family and the remaining shareholders have the option to sell/purchase the shares within a set timeframe. Arranging appropriate shareholder protection insurance ensures that the shareholder’s family receive their part of the inheritance as quickly as possible whilst minimizing disruption to the company.
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"The business partners have a shareholders' agreement in place but we needed the security of knowing that the company could survive the loss of one of us"
"Being totally honest, we took out a shareholders protection policy as we did not want to be put in the position where the family of one of the existing directors would inherit his share and take his place on the company board"