Before the shareholder contract is concluded, as has already been mentioned, each shareholder should take out life insurance or a critical illness policy. It is written in a comprehensive trust document that is returned to shareholders in the event of unexpected death or illness. The value of life insurance or critical illness policy should reflect the value of each shareholder`s interest in the business. Shareholder protection insurance is created to enable surviving shareholders to acquire, in value terms, the shares of a deceased shareholder in the estate of a deceased shareholder. The surviving shareholders retain control and the estate enjoys the value of the shares. The document, which is located next to the insurance policy (and associated fiduciary documents) to facilitate the agreement, is an agreement between options. Many of my clients are small and medium-sized businesses run by owners and have a stake in the business. The problem they often face is what to do if one of the owner-managers gets seriously ill or dies? Can the remaining owners` managers agree to buy their colleague`s shares in the company? Can the individual`s family force other shareholders to buy their shares? Interoperian agreements are used to cover these situations. Due to the nature of a cross-option agreement and its structure, Business Property Relief for IHT is generally maintained on the value of the participation, unlike other agreements that may result in the loss of this significant relief. HMRC will only accept that if partners or shareholders grant options to purchase the other`s shares in the event of death or retirement, this does not constitute a binding sale agreement that results in the loss of BPR until the operating managers of the deceased partner or shareholder are required to sell to the surviving owners of the business and these owners are not required to purchase. Therefore, an inter-option agreement will generally not result in the loss of BPR if properly formulated. In addition, in the event of a takeover by the company itself, at the time of the takeover, there must be sufficient distributable reserves in the business (i.e.
at the time of the exercise of the option and not at the time of the conclusion of the agreement). You should put in place an option agreement with all the directors/partners of the company. An option-to-sell agreement is that the shareholder`s family requests the sale of the shares at the agreed value.