Shareholder Protection

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Have you ever thought about who would be in charge or in a position of influence, if a shareholder or business partner were to unexpectedly leave the business, in the event of death or long term illness? Without the right plans in place, your business could be exposed.

What is shareholder protection insurance?

Shareholder protection insurance provides the funds for the remaining shareholders to buy back shares from the individual or beneficiaries, and retain control of the company if a shareholder or partner were to die or be diagnosed with a serious illness.

When companies are formed, the founding shareholders or partners create a vision for the direction the business will take. The sudden loss of a major shareholder or partner can cause unexpected disruption. Without the capital to buy back the shares, you could find yourself working with whoever inherits them, which could mean someone with a very different vision becoming involved in the business. Without shareholder protection, an organisation’s surviving controlling members may not be able to maintain the direction or future of the business.

How Partners& can support with your business with shareholder protection

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Challenge

If a shareholder or partner dies without leaving instructions regarding their shares, family members are generally next in line to obtain the assets. This can be problematic for a number of reasons. The family/beneficiaries may decide to take over the duties and responsibilities of their deceased relative.

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Support

Like key person cover, a shareholder protection policy can be tailored to the individual and the business. It can be adjusted to include death, or both death and critical illness, such as cancer or a heart attack.

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Perform

Shareholder protection provides a lump sum on the death or serious illness of the shareholder / partner, which enables the remaining parties to buy back the shares, from the deceased’s beneficiaries. In this way, the beneficiaries receive the full value of the shares in cash and you maintain the control and equilibrium of your business.

Person pushing towards the finish line, challenge icon

Challenge

If a shareholder or partner dies without leaving instructions regarding their shares, family members are generally next in line to obtain the assets. This can be problematic for a number of reasons. The family/beneficiaries may decide to take over the duties and responsibilities of their deceased relative.

People support icon

Support

Like key person cover, a shareholder protection policy can be tailored to the individual and the business. It can be adjusted to include death, or both death and critical illness, such as cancer or a heart attack.

Performance icon with 3 stars

Perform

Shareholder protection provides a lump sum on the death or serious illness of the shareholder / partner, which enables the remaining parties to buy back the shares, from the deceased’s beneficiaries. In this way, the beneficiaries receive the full value of the shares in cash and you maintain the control and equilibrium of your business.

Cyber risks

Why is shareholder protection insurance important?

Families/beneficiaries may decide to take over the duties and responsibilities of their deceased relative. If this were to occur, it is possible that an organisation would suddenly have to deal with an inexperienced or disinterested person performing a key role. 

If the family/beneficiaries decide to sell the shares to a third party, it could result in the remaining shareholders or partners losing control of the organisation as a whole.

In the event of shareholder cover funds being paid out to a policyholder, the family of the deceased or ill party will also receive compensation. This amount, as well as other details, should be agreed upon at the time that a policy is finalised.

The benefits of shareholder protection?

There are many benefits of shareholder protection. When businesses are formed, the founding shareholders create a vision of the direction the business will take. The sudden loss of a major shareholder can cause disruption. Without the capital to buy the shares back, you could find yourself working with whoever inherits them, which could mean someone with a very different vision calling the shots.

Safeguarding the shareholders’ interest in the business and providing peace of mind for shareholders and their families creates ongoing business continuity and stability for your employees.

Obtaining the right advice is important – you should be working with specialists who have experience dealing with these very sensitive issues. 

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Choosing the right shareholder protection policy

  • Who does your business rely on for contribution to turnover, client introductions, operations management?
  • Would your business be affected if a shareholder were taken ill or even worse?
  • What plans do you have in place if this were to happen?
  • In view of the difficult economic climate, would you be able to retain clients / keep employees motivated / repay loans?
  • How would you keep control of your business if something happened to one of your partners?
  • Is any debt adequately covered should the worst happen?
  • And what about the families… can they maintain their standard of living without support from the business?

Ensuring the business remains in the right hands at the right time is incredibly important if something unexpected were to happen by providing the necessary means to retain control of the business.

Our team will work with you to develop and implement appropriate solutions to provide the stability you need to keep your business running smoothly, keeping you, your people and your livelihood protected.

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Meet the shareholder protection team

James Porter

Head of Business Protection

Cate Mason

Client Executive – Business Protection
James Porter Headshot

James Porter

Head of Business Protection
Cate Mason

Cate Mason

Client Executive – Business Protection