Business Protection

Personal and Corporate Shareholder Protection

The death or serious illness of a shareholder can have major repercussions for the future of a company. It can cause immediate financial hardship for the remaining shareholders and maybe even loss of control of the company. In essence, the death or serious illness of a shareholder can potentially jeopardise the future of the company and can have major implications for the remaining shareholders.

There is a very real possibility that your company will suffer the loss of a shareholder. The risk of losing a shareholder through death or serious illness may be a lot higher than you think. On death a shareholder’s shares normally pass to their next of kin and the next of kin become new shareholders in the company. The change in share ownership can lead to potential problems for both the next of kin and the remaining shareholders. The next of kin may not want to become involved in the company and may want to sell their shares as soon as possible. The remaining shareholders may want to retain full control and ownership of the company and may not want to work with a new shareholder. A Shareholder Protection plan can help avoid these problems.

 

What are the consequences of not having a shareholder protection plan in place?

The remaining shareholders may not have the capital required to buy back the shares from the next of kin. They may be forced to take out substantial personal loans in order to retain ownership of the company.

If the remaining shareholders are unable to acquire the required capital sum they will be forced to take on the deceased shareholder’s next of kin as new shareholders in the company.

The next of kin may be unable to sell their shares if the Company’s Articles of Association does not allow the sale of shares to an outside party and the remaining shareholders cannot afford to buy them.

The next of kin may be unable to get a fair price for the shares on the open market.

Key Person Cover

The future profit of your business may be at risk!!!!

The future success of every business is dependent on a few key people. A Keyperson is any “key” employee, director or consultant on whom the business depends for its continued success, or existence, and on whose death or serious illness the business could suffer a financial loss.
What are the consequences of not having a plan in place?• The business will have to survive without that person’s unique skills, business contacts, management experience or intimate knowledge of your business. This may result in a reduction in service standards and a loss of confidence by both customers and suppliers
• Bank loans could be called in if the keyperson had given a personal guarantee.

• There could be a withdrawal or reduction of credit facilities by banks or suppliers who are concerned about the future of your company due to the death or serious illness of the keyperson.

• Loans made by the keyperson will have to be repaid.

• Additional cost of recruiting a suitable replacement (if one can be found).

What is the solution?

Putting Keyperson Insurance in place can help your business overcome the financial repercussions of losing a valued member of staff. The Keyperson policy will pay out a lump sum benefit to the business on the death or serious illness of an insured Keyperson. This lump sum benefit will compensate the business for any loss of profit or can be used to repay loans or recruit a suitable replacement.

What is Keyperson Insurance?

Keyperson insurance is life assurance effected by the business on the life of one of its employees or directors with a view to compensating the business for an anticipated financial loss in the event of the death of the individual covered. Keyperson Insurance can also be effected to provide a lump sum payment to the business in the event of a key individual suffering a serious illness.

Partnership Cover

Is the future of your partnership at risk?

The death or serious illness of a partner can have major repercussions for the future of your partnership. It can cause immediate financial hardship for the remaining partners and maybe even loss of control of the business. In essence, the death or serious illness of a partner can potentially jeopardise the future of your business and can have major implications for the remaining partners.

There is a very real possibility that your business will suffer the loss of a partner. The risk of losing a partner through death or serious illness may be a lot higher than you think.

Why do you need a Partnership insurance plan?

Often a partner’s share of the business will be the single largest financial asset he/she owns. On death their next of kin may expect a substantial and immediate payment from the remaining partners. This payment might include:

• Any capital that the partner had invested in the business.

• The deceased partner’s share of undrawn profits.

• Payment for the partner’s share of the goodwill.

• Any loans that the deceased partner had given to the business.

A Partnership Insurance plan can provide the necessary funds required by the remaining partners to meet their financial obligations.

What are the consequences of not having a plan in place?

• The remaining partners may be forced to take out substantial personal loans to make a payment to the deceased partner’s next of kin in lieu of their interest in the partnership.

• If the remaining partners are unable to acquire the required capital sum they may be forced to take on the deceased partner’s next of kin as their new partners. This may not be in the best interest of the business.

What is the solution?

The solution is to have a Partnership Insurance plan in place. The plan consists of two parts:

• A legal agreement – that on the death of a partner the remaining partners will buy back the deceased’s share of the partnership and the next of kin will sell their inherited share to the remaining partners.

• Partnership Insurance – to provide the financial capital required by the remaining partners to buy back the deceased’s share from the next of kin.

What are the advantages of the plan?

The plan benefits both the remaining partners and the deceased partner’s next of kin. It can be set up in a tax efficient manner with remaining partners owning the deceased’s share without paying inheritance tax:

• A capital lump sum will be provided to the remaining partners to buy back the deceased partner’s share of the business, ensuring the remaining partners retain full control of the business.

• The deceased’s next of kin can rapidly realise the value of the deceased partner’s share of the business for a capital lump sum.