In every business it is essential to insure against the loss or
damage to buildings, stock and other assets. Yet the damage
caused by the prolonged absence or death of someone on
whom a large part of the business depends is often
underestimated or not even considered.
For example if a partner in a business dies, apart from their
loss to everyday business activity, there may be important reasons
to buy out their shareholding so that it does not pass to outside
investors. Such unforeseen events can lead to reduced revenues and
in some cases business collapse.
There are specialist protection policies which provide the necessary cash
needed to help keep the business on a sound financial footing:
In the interests of financial security, business stability and continuity, it is essential for private limited companies to provide a safety net following the death of a shareholder.
Shareholder Protection is usually put in place to ensure that, on the death of a shareholder, their shares are available for the other directors to buy and there is sufficient cash available to buy the shares.
The risk of not setting up Shareholder Protection is as follows:
Keyman Insurance is essentially a form of life insurance for businesses. It is generally taken out by a business to compensate for financial loss that would arise from the death or extended incapacity of the member of the business specified in the policy. The policy does not cover actual losses incurred, but instead compensates with a fixed monetary sum as specified on the policy itself. There are generally three categories of loss for which Keyman Insurance can provide compensation:
As a result, a Key Person can be anyone directly associated with the business whose loss can cause financial strain.
damage to buildings, stock and other assets. Yet the damage
caused by the prolonged absence or death of someone on
whom a large part of the business depends is often
underestimated or not even considered.
For example if a partner in a business dies, apart from their
loss to everyday business activity, there may be important reasons
to buy out their shareholding so that it does not pass to outside
investors. Such unforeseen events can lead to reduced revenues and
in some cases business collapse.
There are specialist protection policies which provide the necessary cash
needed to help keep the business on a sound financial footing:
- Shareholder Protection
- Keyman Insurance
In the interests of financial security, business stability and continuity, it is essential for private limited companies to provide a safety net following the death of a shareholder.
Shareholder Protection is usually put in place to ensure that, on the death of a shareholder, their shares are available for the other directors to buy and there is sufficient cash available to buy the shares.
The risk of not setting up Shareholder Protection is as follows:
- Shares may go to the deceased's family, which has no interest in the business
and may prefer a cash lump sum.
- The company or other shareholders may not have the resources to retain control
by buying the deceased's shares.
- The shares may be taken over by someone who does not share the same vision of the
company's future.
Keyman Insurance is essentially a form of life insurance for businesses. It is generally taken out by a business to compensate for financial loss that would arise from the death or extended incapacity of the member of the business specified in the policy. The policy does not cover actual losses incurred, but instead compensates with a fixed monetary sum as specified on the policy itself. There are generally three categories of loss for which Keyman Insurance can provide compensation:
- Protect losses related to the extended period when a key person is unable to work; to provide temporary personnel; and, if necessary to finance the recruitment and training of a replacement.
- Protect profits such as offsetting lost income from lost sales; or losses resulting from the delay or cancellation of any business project that the key person was involved in; or loss of opportunity to expand, loss of specialist skills or knowledge.
- Protect anyone involved in guaranteeing businesses loans or banking facilities. The value of insurance cover is arranged to equal the value of the guarantee given by the key person.
As a result, a Key Person can be anyone directly associated with the business whose loss can cause financial strain.