Shareholder Protection Insurance Advice

Shareholder protection insurance is a specialised insurance policy designed to provide financial security to a company’s shareholders in the event of the death or critical illness of one of the key shareholders.

It helps to ensure a business can continue operating by allowing the surviving shareholders to purchase the deceased or incapacitated shareholder’s shares, thereby maintaining control and stability within the company.

Key features of shareholder protection insurance include:

1. Buy-Sell Agreement: The insurance policy is typically linked to a buy-sell agreement, a legal contract stipulating that if a shareholder passes away or becomes seriously ill, the other shareholders (or the company) have the right to buy their shares.
2. Valuation of Shares: The policy provides the necessary funds to buy the shares at a pre-agreed value, ensuring a fair and smooth transition without placing financial strain on the business or shareholders.
3. Business Continuity: This insurance prevents external parties, such as the deceased shareholder’s family, from gaining control of the shares, which could disrupt company operations.
4. Protection for Families: The family or estate of the deceased or incapacitated shareholder is compensated with the fair market value of the shares, offering financial security without becoming involved in the company’s affairs.

Shareholder protection insurance is a vital risk management tool, particularly for small to medium-sized businesses with few shareholders, helping maintain ownership balance and prevent disputes.

David Williams Mortgage and Insurance Services have specialist advisers who will assess the need for shareholder protection insurance by conducting a thorough review of the business, its shareholders, and the potential risks associated with the loss or incapacitation of a key shareholder. Speak to us to ensure your business is safeguarded in the event of the unexpected.