If your business has shareholders but you don’t have Shareholder Protection in place, this is the blog for you. Our goal isn’t to scare you (although some passages may quicken your pulse) but simply open your eyes to the risks of overlooking Shareholder Protection as well as the rewards it can offer.

Let’s get the worries out of the way first…

The Nightmare Scenario

Today, you woke up to discover one of your major shareholders had passed away. It’s sad, of course, but they were also active in your company, and the loss of their input, experience and connections will soon have a detrimental effect. There may also be a negative impact on relationships with key clients and partners or even the value of the business as a whole. But, before you can think about all that, there are other matters to attend to…

In most cases, the shares of a deceased shareholder will go to their heirs or beneficiaries who may or may not know what they should do with them. At this point, your company could offer to buy them back, assuming it has the funds available to do so. However, it’s completely up to the new shareholder(s) as to what how they play it. They could wish to keep the shares and become involved in the business. They could sell them to someone else. They could even sell them to another shareholder, potentially disrupting the control dynamics of the organisation.

If your business doesn’t have the capital to buy back the shares but also doesn’t want the new shareholder to become involved with the business or sell them to someone else, your options are limited. Short of appealing to the good nature of the inheritor of the shares, your only real path is a lengthy and potentially costly legal dispute to determine the value of the shares and whether those in receipt are entitled to them.

So, if you’re not breaking into a cold sweat already, here’s a quick recap: losing a shareholder could not only impact business continuity but lead to significant costs, legal disputes and, in the worst case, loss of control of your company.

If you haven’t considered these possibilities before, now might be a good time to take a deep breath and read on…

The Dream Alternative

Fortunately, the above was all just a bad dream. Let’s start the story again with the unfortunate demise of a key shareholder, only this time with Shareholder Protection in place.

Because you have implemented a robust Shareholder Protection policy, mechanisms are in place to avoid disruption, disputes, legal battles or a loss of control. Depending on the specifics of your cover, you could buy the shares back from the former shareholder’s estate with a Shareholder Protection payout rather than use working capital. With clear succession planning in place, there’s no risk that unwanted outside parties or investors can become involved with your business. This also means that control of the business won’t unexpectedly change hands. With the risk of financial and legal issues mitigated, you can focus on filling the operational gap left by the deceased with the peace of mind that their family or beneficiaries will be fairly compensated.

But that’s not all…

In addition to providing certainty, continuity and control, Shareholder Protection can offer a range of other benefits, including:

• Protecting your family’s future

Instability or a sudden loss of company control could put you and your loved ones in financial jeopardy. Shareholder Protection reduces this risk.

• Maintaining confidence

In addition to overcoming in-house struggles and employee concerns, Shareholder Protection ensures that external parties retain their trust in your business.

• Customisation options

Shareholder Protection can be adapted to suit the specific needs of your business and its shareholders, whether that’s what triggers the cover or where shares go.

• Improved recruitment and retention

Shareholder Protection can make your company more attractive to potential employees as well as prospects or new shareholders seeking security and certainty.

Ready to sleep peacefully?

Skipping Shareholder Protection is a gamble that no business should take. Achieve peace of mind, ensure continuity and secure your company’s legacy by talking to one of our expert insurance advisers today.

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