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Ownership Protection Insurance

Ownership Protection InsuranceScott Robinson of Sabre Financial says “Continuing our series on Business Protection we now look at the impact that the loss of a shareholder can have on your business.

The loss of an owner or a partner can cause numerous problems as have been outlined in previous articles, but many people overlook the destabilising effect that such a loss can have on the business itself.

When an owner or partner dies, their stake in the business is likely to pass directly to their family. If they are a majority shareholder, this could mean that the remaining owners lose control of some or all of the business and have to work with the spouse or child of a former owner.

It is always possible that whoever inherits a part of the business may choose to be a silent partner, but there is no guarantee of this. Some will want a more active role and may have very different ideas on what the firm should be doing. Another possibility is that the beneficiary may want to sell their stake. But if the remaining owners can’t find the funds to buy this shareholding, it could be sold to a competitor.

Of course, the ideal solution is for the remaining owners to buy back the shares, giving the family a cash sum while ensuring they retain control of the business. The question is, will they be able to raise the funds to do this? This is where Ownership Protection insurance can help.Ownership Protection Insurance provides a pay-out to buy back shares, helping own­ers stabilise the business and ensure it is kept in their hands and not someone else’s.

To set up an Ownership Protection arrangement each owner will take out a life insurance policy, equal to the value of their share in the business. The owners will also sign a share purchase agreement, which is a legal document detailing how the shares of the business can be bought and sold.

These articles have focused on how insurance can protect your business but next month I will discuss how a Relevant Life Plan can provide the families of directors and employees with a financial safety net”.

If you would like any further information please contact Scott on 01548 856444 or email him at scott@sabrefinancial.co.uk.

Sabre Financial is a trading title of Sabre Financial Planning Ltd. Sabre Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

 

 

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