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Shareholder Protection

Are you protected if a shareholder or a partner in the business dies?

In a limited company when a shareholder dies the surviving shareholders run the risk of the deceased’s shares passing to someone with no interest in the company. This can be avoided by the inclusion of certain clauses, such as a cross option agreement in the Memorandum and articles of association. Such a clause can entitle the remaining shareholders to purchase the deceased’s shares at fair market value from the deceased’s estate. Alternatively it can give the deceased’s beneficiaries the option to sell the shares to the remaining shareholders.

Where a simple partnership is concerned when a partner dies the partnership MUST be dissolved. This means that the deceased partner’s share of the business must be paid into his or her estate. This can be avoided by having a partnership agreement in place.

In both cases as long as the legal paperwork has been done prior it will be possible to carry on with the business with the remaining shareholder(s) or partner(s) as long as sufficient funds are there to pay the deceased’s estate for their shares or for their share of the partnership.

We can help you to acquire the most suitable shareholder protection insurance policies and arrange each one under the appropriate trust (they can also be set up in the event of a shareholder/partner becoming critically ill) and in conjunction with an appropriate agreement. This will ensure the correct funds are available to for the remaining shareholder(s) or partner(s) to make the necessary purchase and allow the business to carry on under the new ownership without incurring an unnecessary debt.


Call Allen Financial Services on 029 2002 6220 for a free consultation to find out how we can help to make your business more secure.

Shareholder Protection advice Cardiff