Shareholder Protection for your Business

by | May 6, 2021 | Insurance

In the event of the unimaginable

For many business owners, running a company is a time consuming and complex affair, and as the past year has shown, that complexity could always be added to by the unimaginable. With so many conflicting needs and pressure points, attention is not always paid to what might happen if a shareholder dies or becomes seriously ill. The loss itself would be traumatic enough without the potential stress of disputes regarding the future of the company.

In the interests of financial security and business stability particularly for small/medium sized companies where there may only be two to four shareholders, it really is essential to provide a safety net following the loss of a shareholder as any of the following scenarios could arise:

  • Shares may go to the deceased’s family, who may have little interest in the business and would prefer a cash sum
  • The other shareholders may want to retain control by buying lost shares – but may not have the resources to do so
  • The shares may be taken over by someone who does not share the company’s objectives – and may even be a competitor

Having the right Insurance Policy in place provides certainty for business succession and allows for sufficient funds to be available in the event of the death or specified critical illness of a shareholder. This ensures that the company can continue to operate unhindered while the outgoing shareholder or their family receive fair compensation.

Benefits for Shareholders

In the event of a shareholder’s death or specified critical illness, business continuity is critical. Shareholder Protection sets out the procedures and policies to help ensure that you retain control. Protection would facilitate the following:

  • Arrange for the most appropriate transfer of shares to surviving shareholders, or the company, at a fair commercial price
  • Set up insurance policies to provide the funds to purchase the shares
  • Avoid having to draw on funds set aside for other purposes
  • Prevent the sale of shares to hostile parties, or competitors
  • Help maintain business stability and continuity
  • Help retain confidence of employees and customers

If you would like to know more about this aspect of business protection then please speak to Matthew Baker on 07584577005 at Bakerhill Associates Ltd. He would be happy to help and go over this in more detail.