Guest Feature: A Guide to Shareholder Protection

Tysers Insurance Brokers |


Tysers have partnered with Pareto Financial Planning Ltd, an award-winning financial planning firm in the UK, to provide our clients with the best guidance on financially protecting your business. You can also read the full guide to corporate protection here. 

Hand drawn flat design stakeholders illustration Vector illustration


Control over ownership is one of the primary considerations of business protection. However, ensuring that the value of your share in the business is passed on to your family is equally important.

Losing an owner can have a huge impact on the day-to-day running of a business and can quickly result in financial difficulties. Boardroom confusion can lead to conflict in decision making – the surviving owners and the deceased’s family may have very different ideas about the future of the business.

Depending on whether the business is a limited company, LLP or partnership, there are various methods of arranging protection to cover both the critical illness or death of a shareholder, member or partner.

Business owners will usually wish to pass on their shares to relatives in the event of their death. Shareholder protection can provide enough money to ensure that relatives receive an agreed payment for their share. This allows the surviving owners to maintain control of the business.

In the event of an owner becoming critically ill and wishing to leave the firm, the insurance can provide sufficient funds for them to receive cash in exchange for their shares.


Why take out Shareholder protection?

Shareholder protection policies help protect both the owners and the company in the event an owner becomes critically ill or dies. If an owner suffers a critical illness, the company/co-owners will receive a payment which enables them to purchase the shares of the critically ill shareholder. On the death of an owner, the company/co-owners will again receive a payment enabling them to purchase the shares of the deceased owner, whose estate receive value for the shares. The company/owners are protected as they’re able to keep control of the business and don’t need to find additional funds to make the payment.


What is Automatic Accrual?

Some owners of professional practices, such as chartered accountants or solicitors, are unable to pass on their share to their families. The requirements of the business mean that only qualified individuals can become members or partners.

There will usually be an agreement to automatically transfer the deceased’s interest in the business to the surviving owners. Individual members or partners may consider an insurance policy on their own life to ensure that their family receives a payment equal to the value of their share, as there will be no payment from the surviving business owners. This also means any proceeds of claim are usually not subject to Inheritance Tax and settlement can be made quicker, due to probate not being required before the payment is received.


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Two shareholding directors in a company were unsure of the company value. They were both in their 50s and both married with children. They had no shareholder protection.

The shareholder agreement said that in the event of the death of a shareholder the company had to buy back the shares at the market value. However, there was insufficient capital for either surviving shareholder to buy the shares should one of them die.



The business was valued at £6 million. Pareto Financial Planning set up shareholder protection for £3 million each on own life basis in a trust with the other shareholder as trustee and the company as beneficiary. We also updated articles and shareholder agreement and wrote a Business Will and Power of Attorneys (POAs).

Sadly, one shareholder died 4 years into a 10-year plan. As there was shareholder protection in place the shares went to the deceased’s spouse.



  • Monies paid out to the trust and the surviving shareholder was able to buy the shares from the deceased’s spouse for £3 million.
  • The deceased’s family had financial stability from the sale of the shares.
  • The surviving shareholder owned the company outright, there were no succession issues and no interruption to the business.


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