Shareholder Protection Insurance

Shareholder Protection Insurance provides a set-out, binding agreement between shareholders. It ensures shares remain in the business. When a shareholder passes away, their shares become part of the estate which usually goes to the family. This means the family now own the shares.

This type of policy allows the other shareholders to buy back the shares from the family. This type of insurance benefits all parties. The business can keep the shares, while the family will receive financial support from the monetary value of the shares.

Shareholder Protection insurance is designed to help your business out during a difficult time. The loss of a shareholder can throw a company into uncertainty, especially if it happened unexpectedly.

Having this policy in place can offer financial stability, both for the business and for the family. It also means that businesses don’t need to save up capital or dip into any savings for funds to purchase the additional shares.

It can mean the remaining business owners keep control of their firm. Without a policy like this in place, the shareholder’s stake in the business could be inherited by an unwelcome beneficiary, or end up being sold to a rival.

Having a policy in place means there can be a smooth transition for shares to change hands, keeping disruption within the business to a minimum. What’s more, it can also mean the beneficiaries have a clear idea of the amount they will receive when selling the shares back to the shareholders.

There are a few ways in which this particular policy can be generated, some being potentially more tax efficient than others, so a detailed discussion with the clients will help to determine the preferred policy type.