Have you included your shares in your will?

posted by 2 years ago in News
Have you included your shares in your will?

More than 50% of UK SMEs have provided no actions or arrangements when regarding their shares putting the business at risk if they were to pass away.

Research conducted by Legal & General’s ‘State of the Nation’s SMEs’ report found that just 26% of business owners would invest in the shares left by the deceased, over 50% would depend on their personal wealth.

Less than two fifths have thought about the benefits of a life policy and how it could help their business. One fifth believe that their beneficiaries will inherit and activate within the business, while 16% are sure they would sell on to a third party.

The survey also revealed, 41% of businesses have a shareholder’s agreement while just a third have actually revised the agreement since first starting. More worryingly, not even four in ten with shares of £5m+ have no share protection insurance – this would permit them to purchase their shares back through a lump-sum amount which would prevent shares being tangled in a probate status.

Head of intermediary development at Legal & General, Richard Kateley comments;

“For those established SMEs that have a presence in their chosen market, the death of a business owner can be hugely significant should there be no plan in place or an arrangement regarding company shares. This could lead not only to shares being tied up in probate, paralysing an SMEs operation if this was a majority share, but could see the beneficiaries of these shares becoming involved in the business, whether or not they have any aptitude. Or, in the worst-case scenario, selling those shares to a competitor meaning the surviving owners losing control of their business.

“Many business owners see their business as a way to fund their retirement. The death of an owner could not only put their family’s financial wellbeing at risk, but equally their fellow owners due to the impact on the business. A simple Shareholder Protection agreement can help to protect the owners from a situation like this, as well as help the business stay in the right hands and flourish.

“To help mitigate these risks, businesses should consult a financial adviser to consider the best options to protect their firm from the death of a key person. At the very least, SMEs need to establish a plan about their shares, or include some form of agreement in their will, if they are to ensure the business is left in a strong position to deal with a critical event such as the death of an owner.”