Directors and Partnership Share Protection Assurance.

In the event of the death or serious illness of a shareholder within any organisation, the business needs to be prepared. Ideally the business will be in a position to buy back the shares from the retiring shareholder in the event of ill health, or from the deceased's beneficiary in the event of death.

But what if it cannot afford such a transaction? The problem is that the value of the business could be significant and it would be unfair to expect any business to be in a position to buy back shares at a moment's notice.

Quite clearly, no one knows just what is around the corner and putting a simple life assurance scheme in place can help alleviate inevitable problems that would arise in the event of such an event. The objective of the scheme would be to insure each shareholder to the value of their shareholding. In the event of death or illness the scheme would produce a lump sum, which the surviving (or healthy) shareholders would use to buy back the shares. This is organised within a legal agreement to ensure the transaction takes place as was intended.

In the event of a claim the sum assured is normally paid free from tax: however, the arrangement is paid for by the shareholder not the company and is paid from net earnings.

Life assurance is just one method of ensuring the smooth transition of shares in the event of death, and some of our clients have favoured alternative methods, especially for high value organisations, where premiums are expensive. Alternative options involve placing the deceased shares into trust and allowing dividends from the shares to be paid to the deceased's beneficiaries until the company is in a position to buy back the shares, or on the ultimate sale of the business.

We can help you find the most appropriate solution and ensure that the business is well placed to deal with problems arising from the death of a shareholder.