Have you considered putting in place a Shareholder Protection?

Financial planning often helps manage and plan for income and investments. It considers the business objectives and risk tolerance, giving the business more sense of control in an unexpected event. Financial planning is also about protecting businesses from the death or long-term illness of a business owner and/or a key employee so that the business can continue to function with limited financial impact.

What is shareholder protection?

Simply put, shareholder protection is a type of insurance policy.  In the event that one of your shareholders dies or is diagnosed with a critical illness, you will be provided with a lump sum to purchase that shareholder’s equity in your business.

Why is a policy like this important? 

The consequences of not protecting your business could have a major impact on co-owners and also the wider firm. 

Upon death, a shareholder’s shares will pass to the beneficiaries of their estate.  If you cannot purchase these shares, you could find yourself paying dividends to people who play no active role in your business. 

In addition, it could result in other people making important decisions for your company, despite having no expertise or business skills to speak of. 

You could also face a significant risk where shares in your company are sold to a competing business, which creates a loss of control for your business vision and objectives. Similarly lack of shareholder protection could lead to your business itself not surviving at all.  

Who is it aimed at?

It is typically aimed at business owners. We recommend that once a shareholder protection is put in place that it is reviewed regularly as the value of your business could change over time. This helps avoid shortfalls when looking to purchase deceased’s shares.

What are the costs?

There are different types of insurance policies available, however the cost of all policies mainly depend on what the business is valued at, how long the policy is going to be in place for and the current state of health of the lives assured. You can also choose whether your policy covers death only or death and critical illness.

We can work with you to review your business and illustrate cost estimates as well as provide further coverage on the best suited insurance for your circumstances.

How can we help?

If you’d like to discuss your policy or options, please get in touch with Andrew Tricker (andrewtricker@lfwm.co.uk) or your usual Lubbock Fine contact who would be happy to put you in contact with a Lubbock Fine Wealth Management adviser.

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