Protection – Corporates and Business Owners

As a business owner, you understand that owning and running a business can be fraught with pitfalls and risks. Making a profit isn’t enough; you must also protect your business from claims and lawsuits. It can be a particularly onerous task ensuring the correct insurances are in place and making sure that they are regularly reviewed and updated as your business changes and grows. KAL Capital Partners provide a service to carry out an in-depth review of your business and plan and implement a tailored insurance programme to protect your business from a wide range of risks.

As a shareholder in your business have you considered what would happen to the shares if something unexpected happened? Would your family receive a fair price? Similarly, for Partners in a firm, how sure are you that the other Partners would be in a position to compensate your family should the unexpected happen to you? Also, have you considered the possible disastrous consequences for your business should a key director or employee fall seriously ill or die?

Shareholder protection, Partnership protection, Key Man protection and Relevant Life Plans are some of the areas we help our entrepreneurial clients put in place. These plans need to be structured correctly and we work with our clients’ other advisers in areas such as Business Wills and Cross Option Agreements, ensuring appropriate financial protection is in place, providing peace of mind.

Shareholder protection

Shareholder protection is a vital tool to provide a lump sum in the event of death or critical illness, enabling the company to buy the shares of the relevant business co-owner.

Without shareholder protection an unexpected event could be devastating for the business and its structure. If a co-owner or shareholder were to die without some form of protection in place the shares or business could pass on to outside persons who have no previous involvement in the running of the company. Typically, these may be family members. This could in turn affect the stability of an organisation, leaving remaining shareholders with minority control over a company they run on a day-to-day basis.

Other serious problems that could result include:

• Difficulty raising capital to acquire shares if the spouse decided to sell
• Ensuring the spouse receives a fair price for the shares
• The introduction of an unsuitable buyer for the shares
• Shares falling into the deceased estate
• Shares passing to unfavorable connections of the spouse
• A negative impact on productivity and confidence of employees
• Bids from competitors and poaching of key staff

Shareholder agreements & cross option agreements

Shareholder protection alone does not guarantee that shares immediately pass to the remaining shareholders. We work with the shareholders and their legal advisers to put in place relevant agreements to ensure all shareholders agree to cover each other in the event of their passing or critical illness.

Partnership protection

Partnership protection is essential for most organisations structured as a partnership. If anything should happen to a partner (death or serious illness) then lack of financial resources could be disruptive and problematic for the remaining partners of the business.

If a Partner of the business were to die, the share of the business would generally fall into the deceased estate and may be inherited by their spouse or partner who may have little interest or knowledge of the company. Whilst this may not be suitable for the surviving partners of the business, it also may not provide for the deceased’s spouse or family financially should they decided to sell their share of the business.

We work with the Partners in a business to put in place appropriate cover, protecting the ongoing operations of the business and looking after the deceased’s family by ensuring they receive a fair price for their proportion of the business. Raising capital to fund such an acquisition may be problematic for the remaining partners without such protection.

Key man insurance

Key man insurance, a tax deductible expense, is designed to protect your company against the death or extended ill-health of an integral member of your business, normally paying a lump sum in the unfortunate circumstance of such events.

Who is eligible for such cover is entirely dependent upon the nature of the industry or trade you are in. KAL Capital Partners will guide you through the options for protection, research the providers most suited to your needs and recommend an appropriate solution.

If an integral member of your company dies or has serious ill health it may have heavy financial ramifications for your business. Such events, for example, could result in:

• Loss of business profits
• Recall of business loans
• Loss of key clients and connections
• Reduction in overall business practical know-how
• Closure of the business

Relevant life insurance

Relevant life policies are similar to life insurance or a work place death in service policy. Were an individual to pass away during the term of the policy then a lump sum could be payable to their family or dependents.

Who benefits from Relevant Life cover? Typically, owners and employees of limited liability companies, allowing them to pay for their personal life insurance through your business.

All premiums paid by a company into a relevant life plan qualify for exemption from income tax, National Insurance and corporation tax. This can be a significant saving for company owners compared with a standard life insurance policy paid out of net earnings.

Despite being taken out and paid for by the individual’s employer, the policy pays out to the family or dependents left behind should an employee death occur. The company itself does not benefit from this type of policy directly. As relevant life policies are written in trust, under current legislation the money is issued to the named beneficiary and the lump sum would be tax free.

An additional benefit of this type of policy is that they are not included in the annual or lifetime pension allowances. This is particularly beneficial for those at or close to their lifetime allowance limit.

We will also advise you on how to structure your policies in the most effective way. Our independence allows us to extensively search the market and find the best cover tailored to your individual needs and at a competitive price.

Summary of key benefits to you and your business:

• Pay for your life insurance through your business
• Reduce your company’s corporation tax
• Reduce your personal tax demands
• Reduce your NI contributions
• Typically, no inheritance tax when placed in trust
• No P11D disclosures