Shareholder Protection

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What is Shareholder Protection?

Shareholder protection, or partnership protection policies protect the value of your shares in your business and ensures that the remaining shareholders can buy back the shares from your beneficiaries in return for their monetary value.
The remaining shareholders will usually prefer to retain control of the firm and the deceased’s family usually prefers the money rather than the shares.
On death, a shareholder, partner or director’s share of their business forms part of his or her estate. This means it is usually passed to the surviving spouse, or other beneficiaries, under the terms of their will.
Your business could lose control of those shares if you do not arrange funds to purchase those shares back from the estate.
Your business may suffer as a result – especially if an unwanted family member takes an interest in the business or the interest is sold to a third party to release the capital.
Shareholder protection or partnership protection is designed to arrange the safe return of the business share to the remaining shareholders or partners.
A trust and legal agreement called a double cross arrangement is required in order to ensure the terms of the buyback and to ensure that if the buyer wants to buy the seller cannot refuse and vice versa.

A company's articles of association

A Company’s Articles of Association or partnership agreement deals with the issues of transferring and selling shares – these need to be carefully reviewed together with any trusts and insurance in place to ensure the shareholder or partner can retain control of the company or partnership. Directors’ or partners’ share agreements may provide for the remaining directors to purchase the shares of other shareholding directors when they die. However, there is a risk that the remaining directors may not have sufficient cash available when a fellow director passes away unexpectedly. This can be remedied by putting life insurance in place in case of such an eventuality. If you have not arranged a specific rewritten set of articles of association for your company the generic articles set up at the time of formation of the company can be viewed on the companies house website.

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Life Assurance for partners or co-directors

To keep full control of their business, the surviving partners or co-directors need enough money to be able to buy the share of the business themselves. Life assurance for each partner or co-director, arranged under a business trust for the benefit of the others, ensures that the funds are available. It will need some care to determine the value of the business for insurable interest requirements & what level of cover is required, with a growing business these figures need to be kept under review to keep pace with that growth.

What we offer

We offer comprehensive advice on shareholder protection and partnership protection insurance, as independent shareholder protection advisers, we can search the whole insurance market to find the products that best meet your needs at the most competitive premiums and we are able to help with the trust and legal documents concerned however we recommend that you involve your own solicitor for this aspect. Our Independent Financial Advisers are usually happy to meet at our clients’ preferred location and time and to have detailed initial discussions with no obligation.

To contact us click here.

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