Tax treatment varies according to individual circumstances and is subject to change.

For many business owners, running a company is a time consuming and complex affair. Attention is rarely paid to what might happen if a shareholder dies, or becomes seriously ill.

In the interests of financial security, business stability, and continuity - particularly for private limited companies where there may only be a small number of principal shareholders - it is essential to provide a safety net following the loss of a shareholder:

  • Shares may go to the deceased’s family, who may have little interest in the business and would prefer a cash sum
     
  • The other shareholders may want to retain control by buying lost shares - but may not have the resources to do so
     
  • The shares may be taken over by someone who does not share the company’s objectives - and may even be a competitor

The correct Insurance Policy allows for sufficient funds to be available in the event of the death or specified critical illness of a shareholder. This ensures that the company can continue to operate unhindered while the outgoing shareholder or their family receive fair compensation.

It provides documentation to enable the surviving shareholders to receive the funds free of tax under current legislation (as at 2024/2025). 

Benefits for shareholders

In the event of a shareholder’s death or specified critical illness, one of the most important things to your business is to ensure continuity. Shareholder Protection sets out the procedures and policies to help ensure that you retain control, and have the necessary funds to do so:

  • Arrange for the most appropriate transfer of shares to surviving shareholders, or the company, at a fair commercial price
     
  • Set up insurance policies to provide the funds to purchase the shares
     
  • Avoid having to draw on funds set aside for other purposes
     
  • Prevent the sale of shares to hostile parties, or competitors
     
  • Documentation to enable all transactions to be made tax-efficiently
       
  • Help maintain business stability and continuity
     
  • Help retain confidence of employees and customers

The plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.

The policy may not cover all definitions of a critical illness. For definitions of illnesses covered please refer to the key features and policy documents.

Information regarding taxation levels and basis of reliefs are dependent on current legislation and individual circumstances, are not guaranteed and may be subject to change.