Shareholder Protection Insurance
Death or disability can force change on your ownership structure, making it necessary to draw on cash reserves and assets. It is vital to formalise any shareholder/partnership cover through a buy/sell agreement to ensure capital is distributed as agreed.
Without a formal Share Purchase/Partnership Agreement in place, as part of the business’ documentation, there can be no certainty of a smooth transfer of ownership, in the event of a shareholder/partner wishing to sell shares, retiring, dying, becoming disabled, or suffering medical trauma.
A share purchase or partnership agreement without the means of funding the purchase of a deceased or disabled shareholder/partner’s shares is only half complete. Under the terms of most agreements, if the cash is not available to fund the purchase, the deceased estate/disabled shareholder/partner may have the right to sell to an outside buyer, so effective control of the business can be lost.
For all corporate and partnership structures, insurance cover can be taken on each shareholder/partner, at an amount equal to the value of their individual share, to provide the funds for a smooth transfer, in the event of death, trauma or total disablement.
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