Safeguarding your business’s key assets is vital to ensure you are protected in the face of unforeseen events. Business protection is not just about securing physical assets or intellectual property; it’s about protecting the very people who drive the business forward.
Key person insurance
A key person is someone whose skills, knowledge, experience, leadership, or industry connections are crucial to the success and stability of the business. This could be a business owner, the leadership team or any employee whose contribution is significant and whereby their absence would impact the business operations and/or profitability.
Key person protection is therefore essential in managing the risk and implications from a ‘key’ individual being absent and unable to contribute to their role due to a long-term accident or illness, the diagnosis of a critical illness or in the event of their death.
An insurance policy can provide a cash injection to a business, from the proceeds of a claim. This can minimise the disruption caused at such a time and instils confidence in the business’ customers, suppliers, lenders, and/or investors.
Shareholder’s agreements and insurance
A shareholders’ agreement is an essential tool for any company with multiple shareholders. It provides a clear and fair framework for managing the company, protecting the interests of all shareholders, and ensuring smooth operations. By addressing potential issues before they arise, a well-drafted shareholders’ agreement, prepared by an experienced solicitor, can help to prevent disputes and promote a harmonious and successful business environment. In the event of a shareholder’s death, disability, or exit from the company, the agreement can provide a clear plan for how their shares will be handled. This ensures the continuity of the business and prevents disruption.
Shareholder insurance is a policy taken out by a company or its shareholders to provide financial protection if a shareholder dies or becomes critically ill. Its primary purpose is to enable the remaining shareholders to buy the shares of the affected shareholder, thereby maintaining control and stability within the company. Specialist advice is vital to ensure that the structure of a policy, any associated trusts and premium allocation is implemented correctly to ensure the arrangements are deemed as commercial and do not create unplanned tax liabilities.
Relevant Life insurance
A Relevant Life Policy (RLP) is a type of life insurance designed for employers to provide individual death-in-service benefits to their employees. Company directors can be eligible too and it is an excellent option for small to medium-sized businesses that may not have enough employees to justify a group life insurance scheme. It offers financial protection for employees’ families, tax efficiency for the business, and can help attract and retain top talent. Providing such a benefit can enhance a company’s benefits package and demonstrate commitment to employee welfare.
An RLP is set up by, and paid for, by the employer. It can be implemented by various types of businesses and organisations:
Limited company – for their employees, including directors who are on the payroll.
Limited Liability Partnerships (LLPs) – for salaried partners and employees.
Sole traders and partnerships – for their employees, but they cannot take out a policy for themselves.
Charities – for their employees.
By implementing measures such as key person insurance, shareholder agreements, and relevant life policies, businesses can secure their operations, protect their stakeholders, and maintain business stability and growth.
For more information and advice about business protection, please call 0808 144 5575 or email help@armstrongwatson.co.uk
