What is Share Protection?

What is Share Protection?

If a shareholder or partner in a business passes away there can be serious implications for that business. It doesn’t take much imagination to see that the day-to-day running of the business could be severely hampered, especially if the deceased was very ‘hands-on’ and many business owners simply don’t anticipate the potential impact on the ownership of their business of losing a shareholder or partner.

According to a survey conducted by Legal & General, a third of businesses do not have share protection in place.

If a business owner dies with no share protection, their share in the business may be passed to their family which may mean:

  • the surviving business owners could lose control of some, or all, of the business.
  • their family may choose to become involved in the ongoing running of the business or could even find themselves with no option but to sell their share to a competitor.Dices with Risk under Umbrella (clipping path included)

If set up properly, share protection will help to avoid these issues. It provides the surviving business owners with the funds to purchase the deceased’s shares from their family at a pre-agreed fair value. The surviving business owners retain control of the business while the family of the deceased receive fair value for their share of the business.