Succession for shareholders
Cross-option agreements. So the shares go where they should.
When a shareholder dies, someone has to buy their shares, and someone has to be paid for them. A cross-option agreement decides both in advance, funds it, and keeps the tax relief intact.
What a cross-option agreement is.
A cross-option agreement, sometimes called a double option or buy-sell agreement, is a contract between the shareholders of a company. It gives the surviving shareholders the option to buy a deceased shareholder's shares, and gives the deceased's family the option to sell them, both at a pre-agreed valuation basis.
It usually sits alongside a shareholders' agreement and a life-cover trust. Together they turn a death from a crisis into a process everyone already agreed to.
How it works.
The option, both ways
Your co-shareholders get the option to buy your shares from your estate on your death. Your family gets the option to sell them. Both at a pre-agreed valuation basis. Because each side holds an option rather than a binding obligation, the sale only happens if one side exercises it.
The funding
Life insurance, written into a properly drafted business trust, provides the cash so your co-owners can actually complete the purchase. Without the funding, an option to buy is just a promise nobody can afford to keep.
The tax result
Done correctly, HMRC accepts that Business Property Relief on the shares is preserved, because neither side is contractually obliged to buy or sell until the option is exercised. A binding sale agreement at death can lose that relief.
Without one, this is what happens.
- Your family inherits illiquid shares they can't easily sell
- Your co-shareholders can't afford to buy them, or won't agree a price
- Your family may end up in business with people they've never met
- Business Property Relief can be lost through a badly drafted binding agreement
- Deadlock over control and dividends, sometimes for years
Part of a joined-up plan.
A cross-option works best alongside the rest of the picture: a shareholders' agreement that governs control and transfers, and a will that deals with everything else in your estate. We draft all three so they fit together.
Part of your estate planning
Wills & Estate Planning
Your shares are only part of the picture. A will deals with everything else, and makes sure the cross-option and the estate plan pull in the same direction.
ExploreShareholders' Agreements
The private rulebook between owners: who can sell, at what price, and what happens on death, exit or dispute. The natural companion to a cross-option.
ExploreResidential Property
Own your home as well as your business? How you hold it affects your estate too. We join the two up.
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