In order for the Shareholder/Partnership Protection arrangements to be effective by way of the desired outcomes, certain agreements and documents should be put in place.
When the Life Insurance/Critical Illness policies are arranged, we will assist you to write them in a Business Trust (free of charge and as part of our standard service). This ensures that the proceeds are paid from the insurer to the remaining owner(s) – giving them the money needed to purchase the shares.
The next step is to ensure that the share of the company is bought/sold if and when requested.
Most agreements involve options to buy and sell, as opposed to a firm sale and purchase agreement (so that certain tax trips can be avoided). This type of share purchase agreement is called a ‘cross option’ or ‘double option’ agreement. The agreement could be included in the company’s Articles of Association, or as is more likely to be the case, in a separate agreement entered into by the owners.
The agreement would, broadly speaking, be in two parts. Firstly, on death, it gives the holder of the shares (i.e. the deceased’s executors) the option to sell the shares, and, secondly, it gives the other shareholders a similar option to buy, hence the term ‘double’ or ‘cross option’ agreement. In a Cross Option Agreement the seller can effectively force the other owners to buy, and the owners can force the deceased’s executors to sell.
We have partnered with a specialist legal firm that can offer you no-obligation, impartial advice and solutions to ensure that you have the required documents/agreements in place. If you have your own legal advisers then your dedicated Business Protection Specialist will be more than happy to work with them to provide the policy details etc.