Independent Financial Advice for Business
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Shareholder or Partnership Protection
The death of a shareholder or partner is distressing and a difficult time for both the business and their families. If the business has been in place for many years it may not have crossed your minds what would happen to your shares in the business, if anything happened to you or one of your co-owners. If you are not sure, it would be a very good idea to dig out your shareholder agreement to check.
Imagine that there is no legal requirement for anything to be done with a deceased shareholder’s shares. The shares would pass in his estate to his beneficiaries. Depending on their situation, they could keep or sell them. You could find yourself in business with your co-directors next of kin, whether you wanted to or not. You could not really be sure whether they would sell the shares back to the other shareholders so the business could continue as it has before and if they did decide to sell them back, would the remaining shareholders have the funds to purchase them?
This situation can be very stressful for all involved, particularly family members that have no understanding of the business and are trying to rebuild their lives after the death of a loved one.
A simple solution is a life policy specifically designed to pay out to the remaining shareholders in the event of the death of another shareholder, to enable them to purchase their shares.
The way the policy is set up is important for example a trust may be beneficial and some form of agreement to ensure that the shares are sold only to the remaining shareholders. Advice is crucial to ensure that the situation is managed in accordance with the shareholders’ wishes and to ensure events run smoothly.
For further information speak to Simon Ludden, Financial Planning Manager on 01227 763939.
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