When a company shareholder passes away, their shares are typically passed on to their estate, i.e. their next of kin or other beneficiaries. These family members or beneficiaries then have a choice as to what they will do with their inherited interest/share in the company and may either:
- Take the deceased shareholder’s role in the business on or
- Sell the shares to realise their financial value
Either way, their decision could present the company with potentially serious problems if there is no protection in place.
Shareholders’ families frequently have very little to do with a company and as such often have little to no knowledge of what a business does or how it operates.
If they decide to take on a deceased business owner’s role within a company, their lack of knowledge – which could be coupled with lack of commercial experience in general – could result in their involvement with the business’ daily affairs leaving remaining shareholders or partners facing substantial difficulties and frustrations.
In the long run, this could have a significant detrimental effect on the company’s smooth running and profits. This could, of course, equally apply to other beneficiaries.
If, on the other hand, the beneficiaries/family decide to sell the shares, the company’s remaining shareholders may have little or no say with regards to whom they are sold to or how they are sold.
Even if the beneficiaries consult them about this, finding a suitable buyer can be difficult and time consuming. This could leave both the deceased owner’s family and the company with financial difficulties.
The need to sell these shares quickly could then result in them being sold to undesirable new owners like, for instance, hostile competitors. In the worst case scenario, this could result in the business being dissolved and employees being made redundant.
This type of insurance plan can prevent this from happening. Contact us now to find out how.