Shareholder and partnership protection
Losing a business owner through illness or death has a huge impact on the day-to-day running of a business and can result in financial difficulties, so it’s important to be prepared for such eventualities. Situations can unfortunately arise such as conflict of interests between business owners and the family who have inherited the shares, and without adequate cover the business can end up falling into unexpected (and potentially unsuitable) hands.
Shareholder Protection is suitable for limited companies, whereas Partnership Protection is suitable for partnerships and limited liability partnerships. Protection policies can be issued on a level or increasing term basis and pay a cash lump-sum upon the death of the life assured or upon diagnosis of a specified serious illness if it occurs during the term of the policy. The remaining shareholders can then use the pay-out to purchase the shares back from the family, if required.
Tax relief is not usually available for this type of policy premium, which are usually paid for by the individual shareholder or partner. If premiums are paid by the business, they will be taxed as a P11d benefit in kind. As the proceeds of any claim would be paid out to the trustees and not to the estate of the deceased shareholder, there would be no inheritance tax implications.