Shareholder protection allows business owners to buy shares from a co-shareholder who is diagnosed with a critical or terminal illness, or dies. This policy will ensure surviving owners stay in control and minimise disruption to the business.
Each individual shareholder can take out separate cover for themselves (known as an ‘own life policy’). this ensures them for a sum assured equivalent to the value of their company shares. If, however, they choose to, they can write this into a trust to benefit their co-shareholders. You may need your shareholding clients to enter into an explicit agreement that if one of them dies, the remaining shareholders are able to buy their shares from their personal representatives.
They can also agree that if one of them suffers a critical illness, the affected shareholders can choose to sell their share. If they decide to do this, the remaining shareholders must buy it.
Overall, shareholders protection is very beneficial as dealing with ownership in a company can be difficult in the event of death and illness. A shareholder arrangement sets out how the shares should be valued and gives the surviving shareholders the right to buy their shares or the right to sell. This agreement either open or closed will ensure that the business can progress.