Have you considered what would happen to the shares of a shareholder if something unexpected happened?
If one of your shareholders dies or is suffering from a severe illness, their shares will usually pass to their beneficiaries. To regain full control of the business, the surviving shareholders will need to buy the shares back. But they might not have the available capital to do this.
The benefits of Shareholder Protection?
- Shareholders enjoy the total peace of mind that if an investor passed away, surviving shareholders will not need to worry about finding the money to purchase assets. Instead, they will receive pay-out funds that allow them to buy up the deceased’s shares. Creating a safe and stable business plan.
- Support for family members is very important. Cash payments can help to relieve the stress that families face when losing a key breadwinner. Shareholders will rest easy knowing their families would receive a pay out in case of their death, as policies guarantee a fair buy-out price.
- Shareholder protection insurance can also be used to cover serious illnesses. Given that the right agreements and policies have been put in place, a sick shareholder is able to sell shares to continuing shareholders. Should a shareholder fall ill, the knowledge that they have shareholder protection insurance will be a big weight off their mind.
The risk of not setting up Shareholder Protection
- Shares may go to the deceased’s family, which has no interest in the business and may prefer a cash lump sum
- The company or other shareholders may not have the resources to retain control by buying the deceased’s shares
- The shares may be taken over by someone who does not share the company’s objectives, and they may even be a competitor
Shareholder Protection is a vital tool to provide you with a lump sum in the event of death or critical illness and this would enable your company to buy the shares of the relevant shareholder.
Modern protection plans allow us to tailor cover to meet your business needs as well as your budget.