Business Shareholder Protection Case Study

A company in Wellington has two shareholders. The question I asked them is, “what would happen to the company if one of you dies unexpectedly or is unable to work due to illness or injury?” As one of them had a nasty accident a few years ago they were aware that misfortune could strike, often at the least opportune moment.

There are two issues here: they want the ownership of the shares to pass to the on-going shareholder as neither of them wants the executors or beneficiaries of their estates to have ownership of the company. And where are they going to find the capital with which to buy the shares?

We recommended an insurance policy to provide capital to buy the shares. This policy is written in trust* so that the transfer of shares and capital is tax free. And we set up cross-option agreements so that there is the legal framework in place to ensure that the shares are transferred to the on-going shareholder and the beneficiaries receive the agreed value of the shares without being liable to inheritance tax.

This arrangement ensures that the company can continue to function with minimum disruption.

The levels and bases of taxation and reliefs from taxation can change at any time and are generally dependent on individual circumstances.

Advice in this area may involve the referral to a service that is separate and distinct to those offered by St. James's Place.