Money Matters by Scott Woods

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Around a million businesses across the UK are exposing themselves to serious financial risk through the absence of share protection insurance, according to a joint campaign launched by Legal & General and unbiased.co.uk.

The ‘Every Business Matters’ campaign has identified a growing UK business share protection gap of £683billion, a figure which has increased by 60 per cent from 2011, when it stood at over £427billion.

According to the study commissioned by Legal & General, 45 per cent of UK business owners expect the remaining owners to buy their share of the business in the event of their death. Yet despite this, only 40 per cent of businesses have taken out life cover to ensure the funds are available for such a purchase.

This has significant implications for smaller businesses which could find themselves exposed to serious financial and commercial risk in the event of one of their business owners dying, leaving the remaining owners concerned about the future control of the business.

Interestingly, when it comes to succession planning more than four out of five (81 per cent) Small and Medium Enterprise owners say they would like to pass on their company shares to specific beneficiaries in the event of them passing away, but almost half (44 per cent) are yet to put any legal instructions in place to ensure these wishes are honoured. Almost a further third (31 per cent) have a will in place but have failed to include instructions about their shares.

Further to this, while 56 per cent of businesses across the UK say they have reviewed their Partnership Agreements in the last year, and 59 per cent their Articles of Association, that means that almost half have not (44 per cent and 41 per cent respectively).

More worrying still, over a third (35 per cent) of businesses admit they have never reviewed their Partnership Agreements since the business was started, and a further third (33 per cent) their Articles of Association.

Should you wish to review your current business protection arrangements and therefore try to avoid the pitfalls above, then please get in touch.