Shareholder Protection Insurance
The three methods to write shareholder protection are as follows:
Company Share Purchase
Dream Money take away the stress of what can be a fairly complex process due to company law and tax procedures and which usually involves the help of tax advisers and corporate lawyers by using our own preferred panel of legal specialists to assist you, unless you should wish to nominate your own legal entity. With this cover the company essentially buys back the shares from the deceased shareholder rather than the surviving shareholders buying them and therefore potentially posing problems within the board.
As the company pays for the premiums corporation tax relief isn't available because the policy isn't set up to meet the loss of profits on death. The proceeds of the policy will be free of corporation tax as they are for capital purchase.
Own life policy held under business trust
In this scenario each shareholder has their own policy that is held under trust for the value of their individual shares within the company. The policy is arranged as a fixed term or up until the point of retirement of the shareholder.
Should the shareholder die or becomes critically ill, the other shareholders would use the funds from the trust to purchase the shares of the critically ill or deceased shareholders estate. Those shares are then split as decided between the remaining shareholders.
Life of another policy
This method is usually used where there are only two shareholders and it is unlikely that there will ever be more shareholders. Each shareholder applies for a policy on the life of the other shareholder equal to the value to their shareholding within the business.
Premiums are paid by the shareholders themselves, otherwise if the company paid the premiums, it would be seen as benefit in kind and subject to income tax and national insurance. On the death of a shareholder the proceeds are paid to the policy owner who then uses these proceeds to buy the deceased shares from their family or estate. The surviving director thus owns the company outright and the decreased shareholders estate has been dealt with quickly.
To find out more about our Shareholder Protection Insurance contact us now.