Shareholder protection, for when a partner can’t carry on.
If a fellow shareholder died or fell seriously ill, their shares could pass to someone with no interest in the business. Shareholder protection gives the remaining owners the money to buy them back, at a fair price.
Life (and often critical illness) cover on each owner, with an agreement that lets the remaining shareholders buy the shares from the family.
Is it right for you?
Limited companies with two or more shareholders
Partnerships and LLPs (partnership protection)
Family businesses planning for the next generation
How it works
Each owner takes out cover, usually written in trust for the other owners. A cross-option agreement gives both sides the right to buy and sell the shares. If an owner dies, the survivors receive the payout and use it to buy the shares from the family.
Why it matters
The family gets a fair price in cash, rather than a stake in a business they may not want. The remaining owners keep control, without borrowing or selling.
Working with your solicitor
The agreement needs to sit alongside your articles and any existing shareholder agreement. We’ll arrange the cover and work with your solicitor or accountant on the paperwork.
The choices, explained.
There’s no single right answer. These are the decisions we’ll go through with you, so you understand exactly what you’re buying.
Own-life in trust
Each shareholder insures their own life, in trust for the others. The simplest and most common setup.
Life of another
Shareholders insure each other directly. Can suit two-owner businesses.
Company share purchase
The company buys back the shares, subject to company law rules.
Add critical illness
So the agreement also works if an owner is too ill to carry on.
Two partners in a joinery firm
Gareth and Rob each own half of a joinery business valued at around £400,000. We set up own-life-in-trust policies on each of them, with a cross-option agreement drafted by their solicitor.
If either died, the other would receive enough to buy the shares from the family at the agreed value.
An illustration of how this cover can work, not a real client. Your own recommendation will depend on your circumstances.
Shareholder protection: your questions.
Can’t see yours? Call us, we’re happy to talk it through.
All FAQsHow is the business valued?
Your accountant usually provides a valuation. We base the cover on that and suggest reviewing it as the business grows.
What’s a cross-option agreement?
A legal agreement giving the surviving owners the option to buy, and the family the option to sell, the shares. It’s what makes the cover work in practice.
We already have key person cover. Is that enough?
They do different jobs. Key person protects profits; shareholder protection funds the purchase of shares. Many businesses need both.
Ready to talk it through?
No call centres, no scripts. Just a real person who’ll listen, explain your options in plain English and help you decide.