Modern-day life is busy and moves fast. There is always something on our ‘to do’ lists and as we juggle multiple tasks we tend to put things off. Many of us delay taking action until the unexpected happens, but by then it is often unfortunately too late.

For business owners, there are a whole host of things to consider and decisions to make every day.

What would happen if one of your shareholders fell critically ill or passes away? Who would take on their responsibilities? Would you have the funds to buy back their shares?

Shareholder protection offers answers to all these questions.

What is shareholder protection insurance?

Shareholder protection insurance gives business owners peace of mind and control over the business if a shareholder falls critically ill or passes away. 

Without a policy in place, the deceased shareholder’s shares would be passed to their estate and their next of kin. This could mean that the shares and responsibilities of running the business fall into the hands of people with little to no experience of running a business and perhaps with little interest in the future success of the company. They may decide to cash in their shares or sell them to someone you don’t know. 

To all parties involved, this could cause a lot of stress and uncertainty, especially if you don’t have the funds to buy back the shares. 

How does shareholder protection work?

When you take out shareholder protection insurance you set up an agreement that outlines what will happen in the event that a shareholder falls critically ill or passes away. 

There are several types of policies that work in slightly different ways to best suit your needs. For example, the agreement could stipulate that the deceased’s estate must sell the shares and that the remaining shareholders must buy them. 

The policy pays out a lump sum so that the remaining shareholders can buy back the shares and retain control of the business. The policy also ensures that the deceased shareholder’s family receives a fair payout for the shares.

What are the benefits of shareholder protection? 

Shareholder protection insurance isn’t a ‘nice to have’, but should be considered a must have. There are many reasons why you should have an adequate policy in place, including:

  • Protect the business that you’ve worked hard to build
  • Protect the interests of all shareholders
  • Ensure the family of the deceased shareholder receive a fair payout
  • Minimise disruption to the business, stakeholders, employees and customers

What’s more, some policies offer value-added benefits such as legal and accounting support.

At SN Financial our knowledgeable and experienced advisers can carefully assess your business and recommend the most suitable shareholder protection policy for your needs. 

If you’d like to learn more about how SN Financial can support you and your business, please get in touch with Astra Birch on 01732 926255 or email astra@snfinancial.co.uk