Shareholder Protection

Shareholder protection insurance works alongside a shareholder agreement (or cross-option agreement) to fund the purchase of shares if a shareholder dies or is diagnosed with a critical illness. Without it, shares could pass to a deceased shareholder's family — who may have no interest in running the business.

How Shareholder Protection Works

• Each shareholder takes out a life and/or critical illness policy on the others
• A cross-option agreement is put in place alongside the insurance
• If a shareholder dies or becomes critically ill, the policy pays out
• The surviving shareholders use the payout to buy the deceased's shares
• The deceased's family receives fair value for the shares

Why It's Essential

• Prevents shares passing to family members who may not want to be involved
• Protects surviving shareholders from unwanted new partners
• Ensures the deceased's family receives fair financial value
• Maintains business stability and continuity