If a shareholder or partner in your business were to die could you afford to purchase their share of the business? If not there could be significant impact moving forward, under the terms of most Partnership or Shareholder Agreements, the share of the business owned would pass to the spouse or their estate on death.
Share protection can help secure the ownership of your business should this situation arise.
What is Share Protection?
In short Share Protection enables the remaining partners, directors or shareholders to remain in control of the business should a shareholder or partner die/be diagnosed with a terminal illness.
How does Share Protection work?
In the event of a business owner dying or being diagnosed with a terminal illness, share protection can provide a lump sum to the remaining business owners. This means that in the event of a valid claim being made, the policy could pay out a lump sum to help purchase the deceased partners/directors interest in the business.
Why consider Share Protection?
How would your business buy back that share? What are the consequences of not being able to buy that share of the business back?
- The deceased’s share could be sold to a competitor by their family.
- The family of the deceased may be unable to realize the cash tied up in the share of the business, leaving them in financial distress.
- A spouse of the deceased could come into the business without any real business knowledge or expertise and ‘have a go’ at running it, negatively affecting the business.
A share protection policy can help avoid these issues.