As a company director, there are various safeguards that you can put in place to protect you and your business from financial loss in the event of illness or death. Shareholder Protection is one of the most important policies your business needs if the company has multiple shareholders. This plan ensures that on the illness or death of a shareholder, funds are made available to the company to purchase the deceased’s shares from their next of kin.
For example, Amy, Katie and Laura own a business together. Unfortunately, Amy is involved in an accident and passes away. As she is married, her shares of the company automatically pass to her husband Tom. Tom knows nothing about the business and does not want to be involved however Laura and Katie don’t have the money to buy his shares.
If they had Shareholder Protection in place, on Amy’s death a lump sum would be paid to the company. The sole purpose of the funds would be to buy Tom’s shares. Tom would therefore be compensated for Amy’s percentage of the company and Katie and Laura would retain full ownership of the business.