How To Protect Your Profits with Halo! [Against Damage, Loss & Costs] Pt.2 – Shareholder Protection

An unexpected death can be very distressing for all concerned but when that person is a shareholder in your business, the effects can be catastrophic. However, with a little forward planning, the financial consequences of such an unfortunate event can be minimised.

If one of your shareholders died suddenly:

What would be the impact on you?

What would be the impact on your business?

What would happen to their shares?

Could you afford to buy the shares or settle any outstanding loans?

Shareholder Protection covers your business from the effects of losing an investor or shareholder due to sudden illness or death, by providing the company with an immediate cash lump sum.

This injection of funds enables the company to purchase the shares from the deceased’s estate or repay outstanding debts to allow the remaining directors/shareholders to remain in control of the business.

But before taking out Shareholder Protection, you must determine:

What is the value of your business?

Is the business increasing in value and if so, at what rate?

How many shareholders do I need to cover and what is the value of their shareholding?

Here’s a typical example…

We recently arranged a shareholder protection scheme of one of our clients, a data analytics consultancy with offices in the UK, US and South Africa, and whose clients include the likes of Bank of America, Asda, Investec and EON.

The value of the business was approaching £1m and the 3 directors, all in their early 40’s, owned equal shares.

If any of the shareholders were to die, the company would need to find £300k to purchase his/her shares, assuming that the remaining partner was willing to sell. They could decide to sell the shares to a competitor or retain them and take their seat on the Board!

So what was the solution?

Three life insurance policies were put in place, one for each shareholder, all with a sum assured of £300k. In each case, the shareholder’s policy was written in trust with the two remaining shareholders acting as trustees.

All 3 shareholders then signed a cross-option agreement. This is a legal document which determines that, in the event of any shareholder’s death, their shares would be automatically sold to the company at market value. This purchase would be made using the funds provided by the trust with the proceeds therefore going to the shareholders estate.

The cost of securing the future of a £1m business?

Less than £300 per month!

Simply by putting in place protection to safeguard against the loss of the most important people in your company, you can rest assured that your business will be robust enough to withstand the impact!

Call us now on 0116 366 6866 to begin protecting your profits today, or email us at [email protected]!

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