Shareholder & Partnership Protection

You and your fellow business owners are used to working closely with each other as part of a team, and you will have varying amounts of capital tied up in the business. What happens if one of you suffers severe ill-health or dies? Would you have to raise capital quickly to give a fair value to their beneficiaries? What about the future control of the company - could it pass to individuals unable to positively contribute to the smooth running and profitability of the firm?

Business protection is all about insuring for the unexpected. It’s a way of protecting a business if something goes wrong. It can help make sure the business continues to trade and allows the owners to maintain control while making sure dependants receive fair value for their share of the business.

Key Person Protection

Key Person Protection allows a business to protect itself against the financial loss it may suffer from losing a ‘key’ employee due to death, critical illness or disability. Key persons are those within a business who are vital to its profitability and continued financial success. These might include the founder who gives it impetus and prestige, a specialist such as a scientist or engineer whose knowledge and expertise is vital. It could also be a top sales person who has key business contacts and relationships or perhaps a member of the senior management team.

There are many ‘what if’ scenarios of losing a key person, these can include the loss of confidence by banks and suppliers or perhaps the financial penalties incurred as a result of a delay in completion of a contract or the loss of competitive edge afforded by innovative or design expertise.

Shareholder Protection

Shareholder protection cover protects each of the shareholders in a business. Following the death or diagnosis of a critical illness of a shareholder, the other shareholders receive a cash lump sum which can then be used to buy the affected shareholder’s shares.

This method ensures that the shareholder’s beneficiaries receive an equitable part of the iheritance as quickly as possible with the minimum disruption to the company.

The solution

BNH can help you to protect your company, its profits, control and ownership. It can involve the following steps.

• Identify the risk; Who is essential to the operation, profitability and efficiency of the firm? What happens if one of the owners dies? What would be the financial impact in terms of lost profits or capital raising?
• Legal protection; do you have proper Agreements in place between the business  owners to cover these situations?
• Strength in depth; having identified key individuals, what support do they have?  Can you cross-train others in the firm to step-in to provide support? What about their team - could they shoulder the responsibilities, and if not immediately, how long  would it take to train someone up?
• Recruitment; how long could it take, and how much might it cost to find, attract and  recruit a replacement? Would they want an equity stake in your business?

BNH has the experience and independence to help you through this process, working with your solicitor on the legal aspects as necessary. Having established the degree of risk we can then advise you upon and implement flexible and cost effective insurance arrangements to meet the liabilities identified, supported by legal and tax-planning structures to make them robust and effective.

We would be pleased to provide advice and guidance on the most appropriate solutions, click here to contact us