The strength of most private limited companies is the work and effort put in by the Directors of the company who are usually the key shareholders.
Unlike a partnership which will automatically dissolve if one Partner dies, a company will continue and the shares of the deceased Director will pass to their estate.
The existing Directors may not want the shares going outside of the company and this may even include a wish to prevent an ex-directors family being involved with the company. The solution is for all the Directors to come to an agreement where they will buy out a Director’s share if he or she dies.
Share purchase assurance allows Directors to make provision for such a possibility and ensures:
- The business stays in the hands of the current Directors
- A fair value is paid for the shares
- Quick payment for the relatives of the deceased Director
- Company does not fall into outside hands