Shareholder Protection

“It’s a little known fact that without a partnership agreement in place, all partnerships will be dissolved on the death of one of the partners.”

The risks for business owners without shareholder or partnership protection are high. Upon the death of a business partner, shares are often willed to their family, who may not have the necessary experience to be active in a directors role. Moreover, they may not have an interest in the business and would prefer to be bought out. The remaining shareholders are faced with new business partners who have little interest in the business, or who may potentially sell their shares to hostile third parties creating uncertainty and risk for the business. Ideally, they would want to buy the shares back into their own hands; however the remaining shareholders may not have adequate funding in place to make such a purchase.

By taking out Business Protection policies though Keystone, shareholders can safeguard the stability and continuity of their business. Setting up “own life in trust” policies for each of the shareholders provides the funding for the remaining shareholders to buy back the shares from the deceased’s estate, ensuring the future of the business and the financial security of the deceased’s relatives.

Key advantages of shareholder protection:

  • Funds are available to ensure the arrangement can go ahead without delay

  • A suitable cross-option agreement provides a clean mechanism to direct the transfer from the deceased’s family to the remaining business partners

  • Vulnerable minority shareholders can guarantee ‘fair value’ for their shares

  • Shares are kept within the business and avoid being transferred to unsuitable or hostile parties

  • Adequate provision is made to ensure deceased’s estate is financially compensated

  • Business confidence and stability are upheld

  • Trust facilities are used to enable tax efficient transactions