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SHAREHOLDER PROTECTION

WHAT IS SHAREHOLDER PROTECTION?

Another very important business protection insurance aspect where each individual shareholder can take out separate life cover for themselves. This ensures them of a cash sum equivalent to the value of their company shares. They can write this into trust to benefit their co-shareholders as the beneficiaries.

Shareholder protection allows business owners to buy shares back from any partner who is diagnosed with a critical or terminal illness, or in the event of death. This helps surviving owners stay in control and minimises disruption to the business.

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Why Shareholder Protection Matters

Dealing with ownership in a company can be difficult in the event of an untimely death or illness.

A shareholder arrangement sets out how the shares should be valued and gives the surviving shareholders the right to buy the shares, or the outgoing shareholder the right to sell.

Dealing with the loss of company directors or key shareholders in any business can be very traumatic, even more so with added disputes on how the company might carry on. If an owner passes away without shareholder protection in place then that owners shares would pass to their estate. The insurance protects a business owner and their investment in their company and pays a lump sum to their beneficiaries whilst ensuring the remaining shareholders can keep control of their business.

Any life cover you set up must be aligned with the Articles of Association and the shareholders’ agreement. There may also need to be a trust and/or buyback document in place, for them to be effective.

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Setting Up Shareholder Protection

Each individual shareholder can take out separate cover for themselves (known as an ‘own life’ policy). This insures them for a sum assured equivalent to the value of their company shares. If they choose to, they can write this into trust to benefit their co-shareholders.

You may also need your shareholding clients to enter into an explicit agreement that if one of them dies, the remaining shareholders can buy their shares from their personal representatives.

They can also agree that if one of them suffers a critical illness, the affected shareholder can choose to sell their share. If they decide to do this, the remaining shareholders must buy it.

Any policies you set up must be aligned with the articles of association and the shareholders’ agreement. There may also need to be a trust and/or buyback document in place, for them to be effective.

Life Alliance is registered In England & Wales, CAI Building, Suite 15, Coble Dene, North Shields, NE30 6DE  (Registration Number 11151587).

- LIFE ALLIANCE LTD IS AN APPOINTED REPRESENTATIVE OF PRIMIS MORTGAGE NETWORK, A TRADING NAME OF FIRST COMPLETE LIMITED.
FIRST COMPLETE LIMITED IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

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