What happens when a partner dies?

You have created a company with other partners. What will happen if one of them dies suddenly? Will you then suddenly have to deal with the relatives of this partner as co-shareholders? Can death insurance be a solution?

When a partner dies, his relatives inherit his shares, which is not always a good thing for the company. Worse still, it can even compromise its proper functioning.

This situation can be remedied by adding

• a clause in the shareholders' agreement
• death insurance

Shareholders' agreement  

The agreement between the partners includes a clause which, in the event of the death of a partner, obliges the heirs to sell the shares to the surviving partners.

Death insurance

This clause may also stipulate how the price of these shares is to be calculated. This avoids endless discussions which could in turn threaten company operations.

The redemption of shares can obviously involve a very large amount of money. In order to ensure that this amount does not prevent the surviving partners from redeeming the shares, it may be advisable to purchase death insurance on the life of each partner. If a partner dies, a capital will then be paid to the surviving partners, thus allowing them to pay for the shares. Each of the partners may take out such a policy on the life of the other partners, with him/herself as beneficiary. Your legal advisor or accountant can tell you more about the shareholders' agreement, and your insurance broker will provide you with all of the necessary explanations about death coverage.

Find out here how NN can provide solutions for you and your partners.