Shareholders Protection Insurance

Protect your business and your personal financial situation in the event of the death of a shareholder.

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The untimely death of a business owner or shareholder is a traumatic and tragic event, but it can also have unforeseen financial consequences.

The shareholder’s surviving spouse, partner, or other beneficiaries may inherit their shares and have an immediate need to raise funds. In turn, the surviving shareholders may want to buy the shares but find themselves without the necessary funds.

As a result, the remaining shareholders can find themselves working with a previously unknown third party as shares are sold to the highest bidder, which may be less than the true value of the shares. Or taking on unwanted debt in order to buy the shares themselves. With uncertainty over ownership there are no guarantees that raising the funds at this time would be possible.

Retain control

Shareholder protection insurance pays out a lump sum when a person it covers is diagnosed with a terminal illness, a specified critical illness (if chosen) or dies during the term of the cover.

It is designed to help the surviving business owners to buy the insured shareholder’s shares and retain control of the business. By having cover in place, should anything happen to a shareholder, the surviving owners have the capability to retain control of the business, rather than have someone who has no experience, is unable or has no interest in being involved in the day to day running of the business. Shareholder protection forms a crucial part of successful continuity planning looking after both the business and the family of the deceased shareholder futures.

 

Why buy shareholder protection insurance?

  • Based on a suitable agreement - putting in place an appropriate shareholders agreement is the first step to buying the right cover.
  • Properly designed - shareholder protection cover should be arranged under an appropriate trust.
  • Right for you - the correct insurance ensures that continuing shareholders would have funds to help buy the shares and the deceased's family will receive appropriate financial compensation.

Related FAQs

See all FAQs

How much cover would be needed for keyman insurance?

This would depend on your specific business needs which we would discuss together. This could be a multiple of profits, a multiple of salary or turnover. Your accountant would be able to provide this information to you.

How do I know how much shareholder cover is needed?

We recommend you speak to your accountant who will help to establish the value of the business. The amount of cover should equal the market value of each owner’s share of the business.

What is keyman insurance?

It is a life insurance where critical illness cover can also be included to protect your business against the loss of profit should a key employee pass away or be diagnosed with a critical illness. You can also protect against the loss of a key employee to protect a debt, and it could also help towards the costs of employing and training new personnel.

Who could be classed as a key employee?

Key employees can be regarded as individuals whose knowledge, skills, experience, key relationships or leadership are very important to a business’ future financial success. These can be a senior manager, top sales person, technical specialist, business founder.

What is shareholder protection?

Shareholder protection is a life or life and critical illness policy that will pay out a lump sum that the remaining shareholders use to purchase the deceased shareholders shares from their estate.

Who should consider a relevant life policy?

Directors could take out the cover to provide a ‘death in service’ benefit, without having to take out a scheme to cover all employees. It helps to retain employees and ensure should the worst happen, their loved ones are financially cared for.

What is a relevant life policy?

It is a term assurance available for employers to provide employees with a ‘death in service’ benefit. It provides a lump sum payment on death and there can be many tax advantages to both the employer and employee for this type of policy.

What are the benefits of a relevant life policy?

No National Insurance contributions on premiums and corporate tax relief for the business itself. For their employee there will be no National Insurance contributions on premiums or benefits. The benefits are not taxed as a benefit in kind and importantly the benefits do not count towards annual or lifetime allowances tax benefits.

Who can take out a relevant life policy?

UK resident businesses. These businesses can be a limited companies, a limited liability partnership or sole trader. Company directors can take out cover with the limited company paying for this.

How much does keyman cover cost?

The cost would be dependent on the amount and term of the cover, age, smoking status. Please contact us for a personalised quote.

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