Shareholder Protection

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What is shareholder protection?

The death or critical illness of a shareholder can be a very unsettling time for both their family and the remaining shareholder directors in the business. When a shareholder dies or is unable to work due to critical illness, their shares pass to the beneficiaries of their estate. This is most commonly family members who may have little interest in the future of the business or may wish to sell the shares. A shareholder protection insurance policy provides funds to surviving shareholders to purchase some or all those shares at a pre-agreed value.

Why should you consider shareholder protection?

Shareholder protection ensures that control of a business remains with the surviving shareholders, rather than running the risk of shares being passed to third parties not engaged in the day to day running of the business. It could also prevent the sale of shares in your company to a competitor.

Sometimes, the beneficiaries may not want to release shares and try to ‘force’ their way into the business against the wishes of the surviving shareholders.  Alternatively, surviving shareholders may not wish to release funds to buy back the shares from the family. When considering shareholder protection insurance, there must also be a shareholder’s agreement in place that gives each party the right to exercise their option and force the ‘trade’, ensuring that the right money ends up in the right hands at the right time. For this reason, clients will nearly always need the help of their lawyers to draw up the agreement, and their accountants to value the shares.

How can we help?

At Aston Lark we can advise you on the right approach for your business. We provide bespoke services to each of our client’s specific requirements and we help business owners of varying sizes across many industries to find solutions to help protect their business’ financial future.

Want to know more about protecting your business?

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