Why have Shareholder Protection Cover?
There’s a common misconception that shareholder protection and directors’ insurance are the same. In reality, they are distinctly different forms of business cover. Shareholder protection is designed to safeguard business owners in the event of a shareholder’s death or diagnosis of a critical illness, whereas directors’ insurance typically relates to indemnity or liability risks associated with a director’s role.
Shareholder protection is also often confused with key person insurance. While both aim to mitigate financial risks, they serve different purposes. Key person insurance helps protect the business against the loss of a vital individual whose absence could affect profitability. In contrast, shareholder protection specifically addresses ownership continuity—ensuring that if a shareholder exits due to death or illness, the remaining owners can retain control and minimise disruption to the business.
What are Benefits of Shareholder Protection Cover?
Business Security
Business Security Shareholder protection provides a financial safety net that helps ensure business continuity in the event of a shareholder’s death or critical illness. It enables the remaining shareholders to retain control and avoid disruption.
Decision - Making Power is Retained
Decision-Making Power Is Retained With the right arrangements in place, surviving shareholders can purchase the departing shareholder’s stake, preventing external parties from gaining influence over business decisions.
Stakeholder / Investor Confidence
Stakeholder & Investor Confidence Having shareholder protection demonstrates sound risk management, which can enhance confidence among investors, lenders, and other stakeholders.
A Market for the Shares
A Market for the Shares When structured correctly, shareholder protection creates a market for shares in private companies that are too small to be listed on a recognised exchange. The policy provides the funds needed for a smooth transfer of ownership between existing shareholders.
FAQs
Looking for a Shareholder Protection Cover?
Wealthmax is here to help. Our advisers are experienced in shareholder protection cover and can provide solutions tailored to your business. Contact us today to secure the right cover and ensure stability if a shareholder unexpectedly passes away or becomes critically ill.