Shareholder protection insurance safeguards a company's shareholders from the negative business impacts of one of them dying or becoming critically ill.

When a shareholder dies, their share may be passed to a beneficiary with no interest in the business or even worse, a competitor who doesn't have the best interests of the company at heart.

Therefore, it's important to arrange protection to ensure the continuation of the prosperity, security and stability of the business. This is particularly true for private limited companies which may only have a few main shareholders.

To ensure the business continues to be managed effectively the other shareholders will need to buy the deceased's shares, which is where shareholder protection comes in.

Shareholder protection insurance is designed to pay out sufficient funds on the death or serious illness of a shareholder so that the other shareholders can buy out their share and, in doing so, fairly compensate their beneficiaries.

If any partner dies or becomes ill, the right scheme will be designed to protect the remaining shareholders by:

• Making sure lost shares can be sold to surviving shareholders, or the company, at a reasonable price
• Paying out sufficient money so that the shares can be bought without the need to dip into company funds
• Preventing competitors from owning shares
• Ensuring tax efficiency
• Continuing the stability and prosperity of the business

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