Shareholder & Partnership Insurance Cover

A correctly structured insurance package can provide the “cash” when it is needed the most – in the event of a premature death or serious disability of a shareholder within a company.

A buy and sell agreement sets out the rights of business owners/shareholders in relation to shares in the event of premature death or serious disability. 

This is designed to provide certainty for the surviving shareholders in respect of purchasing the remaining shares from the disabled or deceased estate. It provides a guaranteed method of funding the purchase of these shares that may otherwise prove difficult.

The agreement provides the following:

A guarantee and commitment from all shareholders to sell their shares to the surviving shareholders in the event of the policy being activated.
The agreement provides a predetermined valuation method removing any unnecessary problems.
The agreement in conjunction with the risk insurance provides the “cash” when it is required removing the need for the surviving shareholders to borrow money to fund the purchase of the shares.

The agreement ensures the cash is used as intended.

Which ensures the future control and ownership of the business for the remaining shareholders and provides a guaranteed payment to the disabled/deceased estate.
The insurance cover is usually owned by the parties who intend to enter into this agreement whereby shareholder “A” would own the policy on shareholder “B” and vice versa. Where multiple shareholders or complex structures are present cover can be owned by a nominated trustee.

A buy and sell agreement needs to be implemented by a lawyer and the insurance is designed to fit within this framework. The insurance does not provide any guarantee in respect of how the funds could be used by any party and the policy proceeds are always paid to the policy owner.