How do I value my company shares for shareholder protection insurance?

Question

I want to ensure my family are able to realise the value of my share in our business should the worst happen, how can I ensure my valuation is suitable?

Answer 1

Any business that has an element of recurring profitability has a value attached to it which should be protected in the event of a shareholder death. There are various methodologies applied to valuing a business depending on its type and size.

More often than not we will work in consultation with the company accountant to place a suitable value on your business and shareholding for the purpose of shareholder protection insurance. One of the most commonly accepted methods of valuation would be applying a multiple to the net profit of the company, basing your shareholder insurance cover on your proportion of the total shareholding. 

 

It is important to recognise in addition to the valuation of the business to ensure the relevant trusts are in place to ensure your shares are dealt with accordingly. As part of our consultation process we will help you put in place all necessary trusts, with suitable executors appointed and a legally binding Cross Option Agreement which ensures that the wishes of all parties involved are adhered to.

This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 020 8432 7333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.