Secure Your Business with Shareholder Protection
Shareholder Protection Insurance is crucial for protecting a business from financial impacts due to a shareholder's death or serious illness. This coverage ensures smooth transitions of shares and maintains business stability.
What is Shareholder Protection?
Description
Provides a lump sum payout to remaining shareholders, enabling them to buy the deceased or critically ill shareholder's shares, ensuring control and continuity within the business.
Function
Ensures funds are available to purchase shares from the deceased shareholder’s estate or a critically ill shareholder, preventing external parties from gaining control.
Benefits
Ensures business stability, maintains control within the company, and provides financial security to the deceased's family or the critically ill shareholder.
Importance of Shareholder Protection
Financial Stability
Ensures the business continues operating smoothly without financial disruption.
Control and Continuity
Helps remaining shareholders retain control, preventing unwanted external parties from becoming involved in the business.
Family Security
Provides financial compensation to the deceased shareholder’s family or the critically ill shareholder, ensuring they are taken care of.
Tax Considerations
Premiums and Payouts
Generally, premiums are tax-deductible if the policy benefits the business exclusively. Payouts are usually tax-free but treated as trading receipts, subject to tax on any profits.
Establishing Shareholder Protection
Expert Consultation
Work with a Business Protection specialist to customise coverage to your business's needs.
Required Documentation
Necessary documents depend on your business structure (Limited Company, LLP, partnership, or sole trader).
Agreement Formation
Set clear agreements outlining terms for share purchase in the event of a shareholder’s death or critical illness.
Funding Methods
There are three main ways to set up a shareholder protection arrangement:
- Life of Another: Each shareholder takes out a policy on the other shareholders
- Own Life in Trust: Shareholders take out policies on themselves and place them in trust for other shareholders.
- Company Share Purchase: The company itself takes out policies on each shareholder.
Each method has its benefits, and we can advise on the most suitable option for your business.