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Shareholder Protection

The owners of a company are its shareholders. In most private limited companies shareholders are also the directors. It has been their commitment and skills that have built up the business. In the event of a shareholder dying, the company will continue and the shares will pass to the estate of the deceased shareholder.

This raises the following questions:

  • Will the beneficiaries want to be involved in running the company?
  • Do the remaining shareholders want the deceased shareholder's family involved in running the company?
  • How difficult will it be for beneficiaries to sell the shares?
  • Do the existing shareholders have the liquid assets to purchase the shares?

The solution is for all the shareholders to come to an agreement where they will buy out a shareholder's share if he or she dies.

A share purchase plan allows the shareholders to make provision for such a possibility and means that:

  • The business remains with the current shareholders
  • Expensive loans are avoided
  • A fair value is paid for the shares
  • The relatives of the deceased shareholder receive a payment without delay
  • Company shares do not fall into strange hands
  • The confidence of suppliers, customers and employees is retained

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