In the event you or a fellow shareholder is lost to death or disablement, a shareholder agreement (duly drafted and executed by a lawyer), together with shareholder protection cover can provide certainty and minimise the impact on the business, by clearly setting out what is to happen.
Typically an agreement is made that on the death or disablement of a shareholder, the remaining shareholder(s) will purchase the shareholding from the estate or family with the proceeds of a shareholders protection insurance policy. In this way, the beneficiaries are appropriately compensated for the value of the shares held, and the business can continue to be run by the remaining shareholder(s).
Benefits for the remaining shareholder(s):
Benefits for the estate or family members:
The first step is to ascertain the value of your business. There are a number of different ways to value a business, so in consultation with your accountant, and depending on the type, size, turnover and profitability of your business, a value that best reflects your business will be set. From this point, and based on the shareholding percentages of each major shareholder, the insurance values can then be assigned.