Shareholder Protection
Keep control of the business if a shareholder dies.
If a shareholder dies or becomes critically ill, their shares can pass to family who don't want to run the business — or to someone the remaining owners never chose. Shareholder Protection provides the funds and the agreement to buy those shares back, keeping control where it belongs.
The detail
What this actually covers
When a business has more than one owner, the death or critical illness of a shareholder creates a problem that has nothing to do with grief and everything to do with control. The shares form part of the deceased’s estate and typically pass to their family. Those family members may want an income, may want to sell to an outsider, or may want to get involved — none of which the surviving owners may want.
Shareholder Protection solves both halves of the problem. The insurance provides the money to buy the shares, so the surviving owners aren’t forced to find a large sum at the worst possible time. The cross-option agreement gives the family the right to sell and the owners the right to buy — at a fair valuation — so everyone knows what happens in advance. The result: the business stays with the people who run it, and the family receives fair value in cash.
When you need it
- Your business has two or more shareholders or partners
- You don't have an agreement covering what happens if an owner dies
- You couldn't easily fund a buy-back of a co-owner's shares
- You'd struggle if a co-owner's family inherited their stake
- You want certainty over succession and control
How we work
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Discovery
We review your ownership structure and any existing agreements.
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Valuation
We help establish a fair, agreed basis for valuing the shares.
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Recommendation
We arrange the right policies and the cross-option agreement together.
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Ongoing review
We review as ownership, value, and people change.
Common questions
What is Shareholder Protection?
It’s a combination of life and critical illness cover plus a legal agreement that allows the remaining owners to buy a shareholder’s stake if they die or become critically ill, funded by the policy payout.
What is a cross-option agreement?
Picture two directors with 50% each. One dies, and their shares pass to their family. The family usually wants the money, not the business; the surviving director wants the business, not a new co-owner, and rarely has the cash to buy them out. A cross-option agreement gives the business the option to buy and the family the option to sell, and if either side exercises its option the other has to complete. The insurance provides the money. If the business is worth £1m, each director is covered for £500,000, so the payout buys the shares at fair value and the family receives cash. We work with a solicitor to draw the agreement up.
How are the shares valued?
On a basis agreed in advance with your accountants, and kept up to date. We recommend reviewing the valuation at least annually and whenever the business changes materially. If the business doubles in value, the cover needs to follow.
What happens to a shareholding if a director dies suddenly?
Without protection, the shares usually pass to the family’s estate. With it, the agreement and the payout let the remaining owners buy the shares and the family receive fair value in cash.
How much does it cost?
It depends on the number of shareholders, their ages and health, the value being insured and whether critical illness is included. We quote once we’ve agreed how the shares are valued.
What happens to your business if a co-owner dies?
Book a 30-minute review and we'll pressure-test your succession.