No business owner wants to confront the idea of a partner falling critically ill or passing away, but without shareholder protection insurance, your business could face a trajectory as devastating as the loss itself.
The Hidden Risk
- According to Legal & General’s “State of the Nation’s SMEs” report, 52% of UK businesses would cease trading within a year if a key person died or became critically ill.
- Other sources estimate that 46% of UK businesses would be forced to fold immediately under such circumstances.
These aren’t obscure statistics; they reflect a critical vulnerability facing many SMEs and LLPs.
The Fallout of Inaction
- Research shows that the death of a founding entrepreneur can wipe out an average of 60% of a firm’s sales and cut employment by approximately 17%, with a 20% lower survival rate over two years compared to businesses with the founder alive.
- Similarly, sales dip by 60% four years after an owner’s death, and employment drops by around 17% (Forbes).
Without a formal shareholder protection policy, this disruption could become permanent, jeopardising your company’s future and leaving remaining shareholders in a vulnerable bind.
What Really Happens Without Shareholder Protection
- Shares can pass to next of kin, who may lack interest or competence to manage the business, or worse, sell those shares to a third party or competitor.
- Even if your articles of association or shareholder agreement specifies a buyout, you might not have the liquid funds available—especially if the share value has soared with business growth. Attempting to get a loan under such uncertain conditions can be difficult or impossible.
In best-case scenarios, the business limps along; in worst-case scenarios, it dies, taking client relationships, brand reputation, and livelihoods with it.
How Shareholder Protection Insulates Your Business
1. Immediate Financial Relief
An own-life shareholder protection policy or one with critical illness cover instantly provides the cash needed to buy back shares, helping remaining owners maintain control.
2. Business Continuity
With funds in hand, the business can continue without scrambling for capital, avoiding disruption to operations, clients, and staff.
3. Protecting the Family
These policies also benefit the deceased partner’s beneficiaries—ensuring they receive fair market value for shares, without being thrust into a business they’re unprepared to run.
Summary: The Stakes and the Solutions
| Situation | Without Protection | With Shareholder Protection |
| Business survival | 50–60% chance of collapse within a year | Stronger continuity ensured |
| Financial stability | Uncertain, dependent on loans or personal wealth | Guaranteed liquidity via policy payout |
| Shareholder transition | Risk of unwanted heirs or third-party owners | Smooth, controlled transfer—fair for both parties |
Ready to Act? Talk to a Broadbench Expert Today
Shareholder protection isn’t an obstacle; it’s your business’s safety net. Whether you’re drafting articles of association, considering shareholder agreements, or seeking robust risk management strategies, our Broadbench financial advisers are here to guide you. Let us help fortify your business’s future—no matter what tomorrow brings.
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