You probably have a will that leaves your assets to your spouse, partner, family or friends. If this includes shares in your own business have you thought about how this will affect your business and any other shareholders? What would your family do with their share of your business?
Shareholdings in small and medium sized businesses tend to reflect the value that the shareholder brings to the business. It is unlikely that the heirs to your estate will be able to contribute the same level of value as you do to the business, however they will be still entitled to the same level of dividends as you would have been. They will also have the same voting rights and “say” in the direction of the business going forward.Spouses, partners, families and friends may not share the same rapport with your business partners as you do. Equally you may not get on with the people that your business partners love enough to leave their shares to.
According to research 45% of UK business owners expect the remaining owners to buy their share of the business in the event of their death, however only 40% of companies have taken out cover to ensure that funds are available for the purchase. In any event there is no guarantee what will happen to the shares unless you have a shareholders agreement in place.
Regardless of the arrangements, money will need to change hands and this could be a substantial amount. The Expert Insurance Group can arrange a life insurance policy that pays a sum of money into a trust if you die and provides the surviving partners with the money to purchase your shares.
To ensure the money is used to buy the shares inherited by the family a legal agreement is put in place. The documentation is pretty straight forward but an extremely important part of the process. The money is then paid directly to the beneficiaries of the will.