Shareholder Protection / Share Option Agreements
When a co-owner of a company dies unexpectedly, their shareholding will be passed on as part of their estate in the usual way. If their beneficiaries choose to sell the shareholding, there is no guarantee that the new buyer will want to run it in the same way as the deceased.
In these circumstances it may be in the best interest of the business for the remaining shareholders to buy the shares. However most companies do not plan for such an eventuality. The same need arises when the co-owner becomes seriously ill and is unable to return to work. Although shares do not pass to beneficiaries, it may be desirable for the co-owners to have options to buy or sell the shares.
Share purchase protection covers one nominated individual who can be a partner or an employee. If they die or are diagnosed with a terminal or critical illness, a lump sum is payable either on death or shortly after the diagnosis of a disease.
Some of the options available: