Shareholder Protection for Businesses in Cheshire
The sudden loss of a shareholder can disrupt a company and may cause financial stress at a time when you least expect or can cope with it. Shareholder protection will minimise this interruption to the business.
Although there is a great deal of information to be considered when taking out policies to enable Shareholder Protection, in its simplest form, each shareholder has an ‘Own Life Plan’ written under a business trust.
The aim of this is that when one of the shareholders suffers a critical illness, then the others will receive the funds from the trust to buy the shares from them. If the shareholder has died, the sale of share proceeds would go to the deceased next of kin, according to their will.
As a business grows in value, so the value of the shares increases. If one of the shareholders dies, their next of kin will inherit their share of the business. The other shareholders may not want the next of kin involved in the business, or the next of kin may want to exit the business and as such will expect to be paid for their share. Not many businesses have the capital or cashflow to be able to accommodate this. Shareholder protection enables the purchase of the share to take place using the life policy that was in place.
The short answer is, yes. The level of cover has to be calculated fairly, and the policies written into the appropriate type of trust. There may be a need for a document called a cross-option agreement to be drawn up, protecting both the remaining shareholders (the company) and the deceased’s next of kin. Aspire Financial Services can provide the appropriate advice and works hand in hand with the top providers in the market.
Call us to for a free 30 minute consultation find out how we can help you to protect your business.