Over half of British small business owners do not include instructions on what to do with company shares in the event of their death.
According to Legal & General’s “State of the Nation’s SMEs” report, “51% of UK business owners leave no instructions about company shares in a Will”. This leaves a large number of businesses at risk of closure in the event of the owner or a director’s death. Just 26% of shareholders said that they would purchase the remaining shares should a fellow shareholder die (over half would need to use personal money to do so). Just 41 per cent of companies surveyed had a shareholders’ agreement and around a third had reviewed business arrangements since it had been formed.
Failing To Prepare
Less than 2 in 5 of those surveyed in the report had considered how a life policy could help them, with 1 in 5 saying they believed that their beneficiaries would inherit their shares automatically and then become active within the business. The reality is, that without properly preparing for the death of a shareholder, however unlikely, shares could become tied up in probate, bringing business operations to a halt. Shares may also have to be sold to a competitor, taking control of the business away from remaining shareholders. A shareholder protection agreement is a simple way to avoid any fall out from the death of a large shareholder.
By discussing your business in relation to your Will with a financial adviser, you can discover the best options when it comes to protecting your company. Take a look at our Will & Estate Planning services to see how Charles James can help you. You can also get in touch with us via our contact page.