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

An adequate 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 2023/24).