A Look at Shareholder Protection Insurance
It is no secret that shareholders represent the financial “life blood” of many businesses. Shareholders provide the necessary capital that is required for a firm to grow and to succeed within what is certainly a competitive environment. One of the key points in order to ensure continuity will therefore revolve around the shareholders themselves. What happens in the unfortunate event that such an individual dies? The main issue here is that any relevant shares need to be made available to other directors and stakeholders within the firm as soon as possible. One of the best ways to ensure that this is the case is to employ what is known as shareholder protection cover. How does this policy function and what are some of the key associated benefits?
A Look at Shareholder Protection Insurance Plans
In some ways, a shareholder protection policy is actually similar to an existing insurance plan. The main difference is that each director will take out a policy that is equivalent to the aggregate value of their share holdings. To avoid tax pitfalls, these packages can then be placed into a common trust. In the event that a shareholder dies before these shares can be distributed, the insurance plan will come into action. Other stakeholders can then purchase these shares to guarantee that the solvency of the business in question is not jeopardised.
Family Benefits
We should also note that shareholder protection cover can likewise prove advantageous to any family members named within the policy. For instance, there may be times when an unexpected death incurs sudden funeral expenses or other financial hardships. Family members could have the option to sell these shares back to the remaining directors; offering up a much-needed source of liquidity during such troubling times.
The Risks of Not Purchasing Shareholder Protection Insurance
From what we have already seen, it should be obvious that there re some very real risks should such a policy not be present. The most obvious is that the remaining directors may not have the legal power to take control of the holdings of the deceased. However, there are other dangerous possibilities such as:
For whatever reason, family members involved in an inheritance may not wish to relinquish control of the shares.
An outside party may suddenly purchase these holdings (perhaps someone who does not have the best interests of the company in mind).
Thankfully, shareholder protection plans are the best ways to mitigate the chances of these situations occurring. It is therefore imperative that such options be put into place as soon as possible; even if there are only a few shareholders.
We should finally note that depending upon one’s needs as well as individual circumstances, the cost of these policies can differ. Planning ahead is obviously the best option. Please fill out the online form provided on this page to receive an accurate and transparent quotation. A bit of preparation today will provide a solid peace of mind in the future.