Shareholder Protection is a form of business insurance. It is put into place to protect all the Shareholders within the business as well as their respective families.
If a shareholder dies or is diagnosed with a critical or terminal illness then this insurance will pay out a lump sum to make sure that all parties are adequately looked after. The money received can be used by the remaining shareholders to buy out the seriously ill or injured shareholder. Also if the worst were to happen the deceased Shareholders family members.
If this type of cover wasn’t put in place it could lead to a family member who has no knowledge of the business demanding to have their ex-partners say and involvement in the company. It could also lead to the family being financially crippled at a time when they have potentially lost the family’s main breadwinner.
To avoid this from happening, a cross option agreement would be recommended. This goes alongside the Shareholder Protection policy that we would put in place. This will mean that in the event of the worst happening the remaining Shareholders could buy out the deceased’s shares. This would mean that the estate has the money from the insurance policy and the remaining Shareholders can continue running the business as they see fit.