At Lakeland Finance Ltd we find that businesses will often have shareholders who will be actively involved within the day to day running of the company. However the shareholders as well as family members of the shareholders who may not be actively involved often want to know that their family investment, tied up in share capital, is safe if anything were to happen. Having in place shareholder protection insurance with a shareholder agreement and a single or doulbe/cross option agreement is the best way of facilitating this.
For example two people in a company will often own a 50/50 split. If one of the shareholders dies the other is now left with the running of the company with a third party, leaving them with someone else owning 50% of your company. That person could of course be the wife or husband or other family member of the deceased. They may have no intersest in the business and want to sell their half of the company, but the other sharholder may not be in the financial position to buy the shares from the family member or third party. What if you do not know or get on with the family member or third party? This could have massive complications for the business going forward.
A shareholder protection policy will allow each shareholder to receive a lump sum of money if the other shareholder dies or is diagnosed with a Critical Illness and is unable to carry on with the running of the business. This money can then be used to buy the shares from the other shareholder or new owner. The spouse or family member is financially rewarded for the shares and the remaining shareholders then own 100% of the business. If you would like any further information on shareholder protection then please contact us and we will be more than happy to discuss your requirements in more detail.