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Shareholder Protection


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Shareholder Protection Insurance

Safeguarding your business with shareholder protection insurance advice from Black Lion Insurance could be the best decision you ever made.  Why?  Because this is a matter that could affect the livelihood of several important people: your employees, family and fellow stakeholders.  We’re here to help you find the best type of policy to offer a best-case solution to a potentially wide-ranging series of problems.

What is shareholder protection insurance?

In a nutshell, if a shareholder in your business dies or become critically ill, the policy will pay out a lump sum to your business to ensure that the succession planning process is as smooth as possible.

The remaining shareholders will be able to buy back the shares, keeping control of the business. Also, the deceased shareholder’s family will have the chance to monetise shares in the business.

Formalising an agreement in such a way offers peace of mind not only to fellow stakeholders but also to family members.

What are the policy options?

There are two:

As a shareholder, you can take out your own individual shareholder insurance which will last until you retire, or:

Your business can take out policies on each of the shareholders, enabling it to buy back the shares from the deceased by means of a trust to sell to the other shareholders.

The business will pay the premiums.  This is an expense that you as a business owner can claim against tax, but which HMRC will see as a taxable benefit in kind for the shareholders.

What happens without shareholder protection insurance?

Things could get messy.

Recent research from Legal & General revealed that over half of the businesses in the UK have no formal agreement in place with regard to shareholders.  Is this you?

Upon death, their estate could inherit the shares. This gives rise to all sorts of potential knotty issues.  For example, an ill-suited family member taking over as partner in the business, becoming an unwelcome sleeping partner, or even selling the shares to someone that the business wouldn’t consider suitable.

Best avoided.

Talk to the experts at Black Lion Insurance

We have access to a wide range of insurance products from an extensive group of high-profile insurers, such as Aviva, Aegon, Liverpool Victoria, Legal & General and many, many others.

We’ll offer advice on everything to do with shareholder protection, such as Premium Equalisation (a means of factoring in a disparity in age or health issues).  And, we’re happy to do so.  Our team are passionate about helping our clients understand what they’re buying and why they may need it.

Also, you may wish to consider super-charging your cover with other policies, such as critical illness cover, or shareholder life insurance.  If you’re not sure, pick up the phone and give us a call.  We’re happy to help.

In today’s challenging business environment, establishing a robust shareholder protection insurance policy underpins a stable business plan.  Being able to purchase the shares quickly and easily enables the business to return to normal as soon as possible – and, importantly, to keep trading.

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Step 1. Select Type of Policy

What are the policy options?

Individuals take out a personal shareholder insurance policy

The individual takes out his or her own life shareholder insurance, which will last until retirement age. Premiums will be charged to the individual shareholder and be paid from post-tax income, therefore resulting in no tax relief.

Premium equalisation

It is important to take into account any differences between shareholders, such as age and health issues. This could result in older shareholders having to pay more for a lower level of protection. Equalisation ensures that HMRC do not view the policy as a ‘gift’ to younger employees or those with a smaller share in the business. Equalising means that the cost of insurance is divided equally between shareholders.

The business creates shareholder protection insurance policies on behalf of their employees

The company creates a policy for shareholders with the insurance premiums being paid for by the business. Therefore, shareholder protection is seen is a deductible business expense for corporation tax. Furthermore, it is regarded as a benefit in kind for the shareholders, so will be taxed accordingly.

For both policy options, it is written into trust for the benefit of the remaining shareholders, and upon serious illness or death the insurance company will pay out to the other shareholders.

About Us

Part of Halo Consulting, Black Lion Insurance are a dedicated team of insurance consultants with years of experience in guiding our clients to a solution that meets their specific needs. We specialise in helping both employed and self employed individuals, as well as business owners on a variety of solutions, which range from life insurance, income protection insurance, keyman insurance and shareholder protection insurance.

The guidance and/or information contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK

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Black Lion is part of Halo Consulting and a trading style of Halo 2018 Ltd which is authorised and regulated by the Financial Conduct Authority (FCA). Financial Services Register Number 811239. “