Directors and companies need to be aware of shareholder protection insurance and what it could mean if you do not put things in place properly. Much like key man insurance, shareholder protection protects the shareholders in the event of another shareholders death or diagnosis of a critical illness. It can be set up much the same as a key man insurance policy. IE the company pays for and owns the policy, but there is also a shareholder agreement put in place. These are sometimes called cross shareholder agreements or double option agreements. They can normally be quite straight forward to set up but it obviously depends on how many shareholders there are and what the splits in shareholding is. MyKeyManInsurance can provide simple shareholder agreements and guide/help set them up along with setting up the life & critical illness part of the policy of course. We would always advise that you maybe seek the advice of a solicitor as well to help set up the policy. Especially if there is already a company will in place.

In its simplest form, shareholder protection offers the shareholders the option of buying out the shares from the deceased next of kin (wife or husband). Without a shareholder protection and agreement in place this can often cause lots of problems as the next of kin may now own a large amount of shares of a company of which they really know little of the day to days running’s. The remaining shareholder or holders may be in a position where they are now struggling to run the company an unable to afford to buy the shares from the deceased next of Kin. This now leaves the company in a very tricky position and can often cause many problems as well as a loss in share value. With a shareholder protection insurance in place the remaining shareholders can use the insurance benefit to purchase the shares from the deceased wife/husband for a pre agreed price therefore not having to find the money from their own funds. Both parties are therefore financially happy. Take a look at the video on the homepage for further in depth look at what can happen without shareholder or key man insurance.

To set up shareholder protection insurance is not always as straight forward. Please feel free to drop us an email or call us on 01702 219560 for advice for setting up or shareholder agreement documentation.

We use a range of other insurance providers and their products may be more suitable for your needs. These articles are for information only and does not constitute as financial advice in any way.